New Biden CAFE Standards May Be an Existential Threat to US Automakers

New Biden CAFE Standards May Be an Existential Threat to US Automakers
Ford CEO Jim Farley (left), Ford Executive Chairman Bill Ford (center), and Michigan Gov. Gretchen Whitmer take to the state for a photo after announcing at a press conference that Ford will be partnering with the worlds largest battery company, a China-based company called Contemporary Amperex Technology, to create an electric-vehicle battery plant in Marshall, Mich., on Feb. 13, 2023. (Bill Pugliano/Getty Images)
J.G. Collins
Earlier this month, the Biden administration issued revised Corporate Average Fuel Economy (CAFE) standards that dictate fuel mileage standards for passenger cars and light trucks in the United States. The new CAFE standards require 49 miles per gallon (mpg) on U.S. vehicles by model year 2026.
In making the announcement, U.S. Transportation Secretary Pete Buttigieg said, “Today’s rule means that American families will be able to drive farther before they have to fill up, saving hundreds of dollars per year ... These improvements will also make our country less vulnerable to global shifts in the price of oil, and protect communities by reducing carbon emissions by 2.5 billion metric tons.”
Despite Secretary Buttigieg’s sop to global oil resiliency and national security, the clear purpose of the revised CAFE standards is to further the Biden administration’s strategy to address its “climate crisis” dogma. The administration’s strategy is to get two-thirds of new vehicles to be electric within 10 years.
That strategy brings us to the thinking of General Omar Bradley, former GE CEO Jack Welch, and management consultant Peter Drucker. We need to question the strategy, its implementation, and the culture where the strategy will be implemented.

Strategy Can Fail: Let Us Count the Ways

Let’s look at some real-world examples of how a strategy can fail because it was the wrong choice, its implementation failed, or it was implemented in a culture that rejected it.

Even assuming a strategy is “right,” then “implementing like hell” can be disastrous, as has been proven countless times.

  • Think of the recent debacle with the collapse of Silicon Valley Bank (SVB). The bank adopted a strategy to become a veritable boutique bank for venture capital (VC) firms and their portfolio companies, which was great for its growth. By “implementing like hell” with the VC industry, SVB grew deposits by 220 percent from 2020 to 2021 compared to just 26 percent growth for competitors. But the rapid growth among a concentrated core of depositors in the VC industry, as opposed to a broader base of businesses,  ultimately forced the bank to melt down in March. The players in the small circle of venture capitalists, who are notoriously cliquish, all panicked and withdrew their deposits at the same time, causing a run on the bank and, ultimately, into failure.

Even if the strategy is “right,” its execution—its  implementation, in Jack Welch’s words—can fail and leave the situation worse off than if the strategy had not been adopted.

  • Think of the 2021 Afghanistan withdrawal, or its disastrous World War II counterpart, “Operation Market Garden” (1944). In both, the strategy was right: get out of Afghanistan and, in WWII, develop a salient through Holland to bypass Hitler’s Siegfried Line in order to invade Germany’s industrial base in the Ruhr Valley. But both operations shared similar planning and “implementation” failures that I wrote about elsewhere, largely attributable to the “logistics” factor General Bradley warned about. Both failures left the United States in a worse position than had the strategy not been adopted. The Afghanistan withdrawal cost the lives of 13 American servicemembers and left nearly a score more grievously wounded. It killed 60 Afghani civilians and wounded 140 more. It left a multibillion-dollar cache of weapons in the hands of the Taliban.  “Market Garden” left scores of thousands of allied fighters killed, wounded, or captured, and caused the Nazis to retaliate against the Dutch people with the Hongerwinter (Hungerwinter) that starved to death some 20,000 Dutch civilians.

And as Drucker said, “Culture eats strategy for breakfast.”

  • Consider Anheuser-Busch’s strategy to use its “unique position to bring attention to DEI (diversity, equity, and inclusion) issues in a way that brings consumers along on the journey to drive positive change and create a more equitable world,” as its top communications officer was quoted saying. The strategy was “eaten for breakfast” by the culture of the mostly male, beer-swilling, cisgender, Anheuser-Busch customer base who were repulsed by the brewer’s partnership with a transexual social media influencer. The company quickly retreated from the strategy after a customer backlash.

The Biden Strategy EV Strategy

The Biden administration is subsidizing a nationwide network of charging stations for costly vehicles with built-in batteries with a large part of the price being the built-in battery. The White House statement announcing its plans didn’t even mention alternatives, like swappable batteries. So it’s clear the Biden administration has chosen to adopt Jack Welch’s mantra to “pick a direction and implement like hell.”
But it’s not clear how the strategy was adopted, who was responsible for conceiving it, which (or even if) alternatives were considered, or whether the strategy was ever vetted or “red-teamed”—that is, vetted aggressively to evaluate flaws.

What is clear, however, is that the strategy could have catastrophic consequences for the U.S. auto industry—and the U.S. economy—if it fails.

So, let’s briefly red-team the Biden administration’s policy to force electric vehicles (EV) on the public and the many ways it could fail.

A Red-Team Critique

Andrew Wheeler, who ran the Environmental Protection Agency under former president Donald Trump, recently offered a litany of reasons why the Biden administration’s strategy will fail on John Catsimatides’s “Cats Roundtable” on WABC Radio. 
Among the many shortcomings of EVs that Wheeler described relative to internal combustion engines (ICE), the kind that power most cars today, were:
  • The wind and solar electrical grid that the Biden administration also hopes to implement cannot support the EVs it has mandated.
  • We don’t produce enough of the minerals and rare earths in the United States to produce EV batteries, making us reliant on China to provide them—a significant geopolitical risk for an industry so important to the United States.
  • New EVs are simply outside the budget of most lower- and middle-income Americans. Consequently, lower-income Americans will be forced to continue driving older ICE vehicles, which are inherently more dangerous than newer vehicles.
But even assuming all the challenges Andrew Wheeler specified could be fulfilled, and replacing ICEs with EVs nationwide is the “right” strategy, even then the Biden administration’s choice may be in error.

Foreclosing Other Options

There are proven systems that support “swappable” battery EVs. They allow drivers to pull into a swap station and swap their discharged battery for a fresh, fully charged battery and be on their way in about three to five minutes, about as long as it takes to fill up today’s ICE vehicles. These swappable batteries can also be charged at home, the same as EVs with built-in batteries.
As of now, even the most rapid chargers of built-in batteries—the Tesla Supercharger—needs about 15–20 minutes to charge roughly 200 miles of power. Those Supercharging stations require a direct current (DC) connection to power lines and reportedly degrade the battery somewhat faster than alternating current (AC) charging.
A Telsa at a charging station. (Steve Jurvetson/Wikimedia Commons)
A Telsa at a charging station. (Steve Jurvetson/Wikimedia Commons)

But battery-swapping stations, while having a more substantial physical footprint, can swap batteries in as little as three minutes, use AC electricity, and, perhaps, could occupy the space of existing gas stations.

A battery swap station.<br/>(bfishadow/Wikimedia Commons)
A battery swap station.
(bfishadow/Wikimedia Commons)

A Logistics Advantage

General Bradley would have considered swappable battery cars far more advantageous because of their logistical advantages.  Instead of having to build out an extensive network of charging stations with DC connections to the electrical grid, and cars waiting 15–20 minutes for a single charge, we could build out fewer (albeit more substantial) swapping stations, perhaps along the footprint of existing ICE service stations. Moveover, drivers would be assured of a fresh and fully charged, reliable, battery under what is known as “batteries as a service” (BaaS).
Here are some other important comparisons:
ConsiderationFixed BatterySwap Battery
Charging requires new electrical  infrastructure at owner’s residence? No, but recommended. No
Battery may be rented?No; purchased as part of the car.Yes
Degraded battery easily replaced?NoYes
Cost for replacement battery? $10,000 to $20,000$150-$200/mo (BaaS).

A Cultural Advantage

Peter Drucker’s admonition that “culture eats strategy for breakfast” also gives a greater advantage to the swappable battery model.

The Biden administration seems to think Americans will sit quietly at a Starbucks, sipping latte, while waiting 20 minutes for their car to charge at what Tesla calls its “ultra-fast” charging stations. It also assumes that when the time comes that the battery on their otherwise fine, but older, car wears out, that they will step up and pay as much as $20,000 to replace the battery, hoping the remaining life of the car will justify the additional expense.

Really? Americans? I somehow doubt that. I think they’re more inclined to buy a cheaper EV with a swappable battery and subscribe to BaaS so that they can discard their vehicle simultaneously with their BaaS battery.

Americans also aren’t likely to tolerate range anxiety—that is, the fear of EV owners that they will be left stranded on long trips where chargers are few and far between as their older batteries degrade or are affected by cold weather. There’s also what is called “charge anxiety,” which is customers’ fear that upon reaching a charge station it is inoperable, that the software reading the charge overstates the actual charge, that the credit card reader won’t work, or that their current charge in a degraded battery may die while waiting in line to get a fresh charge.

Finally, the purportedly “ultra-fast” charger (if 20 minutes can be so described) uses DC circuitry and costs about $150,000 for a charging station of four, before any costs for hooking them up to a DC line. That’s a rather hefty budget item for small and medium-sized towns of a few thousand people. It’s even a stress on larger municipal budgets.

Notably, China’s government, our so-called “strategic competitor,” has invested heavily to produce cars with swappable batteries and already has implemented the technology. Chinese EV company Nio has completed over four million battery swaps.

The Enormous Stakes

According to Reuters, making any shift to EVs globally will require widespread adoption of the technology in China, the world’s largest car market. Reuters goes on to say:
“If China is successful in making swapping successful on a large scale ... the shift could undermine the business models of global brands like Tesla, Volkswagen, and General Motors, whose EVs are designed for and powered by their own proprietary batteries and, in Tesla’s case, its own charging network.”
Reuters goes on to quote John Helveston, assistant professor at George Washington University’s School of Engineering:
“If Beijing ultimately mandates swappable batteries and starts saying, ‘Okay, the only car you’re allowed to produce is one that meets the standard’ ...  you would have to comply to stay in business in China.”


It’s not even clear that any of the battery-powered EV strategies is correct. Fuel, materials, and mechanical technology might deliver further reductions in emissions while maintaining existing ICE infrastructure with substantially less burdens on consumers and communities than adopting to EVs. But even assuming EVs are the right way to go, why not consider hydrogen-powered vehicles? Their technology is far less advanced than the EV tech, but has a number of advantages. It comes without the burden of disposal of lithium-ion batteries and the United States is the world’s second-largest producer (after China).

The Biden administration’s decision to “choose a direction and implement like hell” using EVs with built-in batteries was nothing that voters or even the Congress weighed in on; it was made by administration bureaucrats under Secretary Buttigieg’s auspices in the Department of Transportation. It could very well be a mistake with catastrophic consequences, one that could surrender the U.S. auto industry to its Chinese competitors.

I would personally prefer to see an “all options” approach: let all the technologies compete, including more efficient ICE vehicles.  I suspect if there is an EV preference, it will be in swappable batteries.

Congress should vet all the available options, maybe invest in research on others, and then allow American consumers, not Washington bureaucrats, to decide.

J.G. Collins is managing director of the Stuyvesant Square Consultancy, a strategic advisory, market survey, and consulting firm in New York. His writings on economics, trade, politics, and public policy have appeared in Forbes, the New York Post, Crain’s New York Business, The Hill, The American Conservative, and other publications.
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