00:00Well, I mean, it's a bit of a whipsaw effect, Tim, because automakers during the Biden administration, when they really toughened standards, spent billions creating infrastructure for EV factories and battery factories.
00:13And all of that is losing the money now because President Trump has done away with the EV, what he called the EV mandate, right?
00:22He took away the $7,500 consumer tax credit for buying an electric vehicle.
00:26But more importantly, he also zeroed out the penalties for not meeting fuel economy standards or emission standards, which is saving the automakers billions because now they can build whatever they want with no penalty.
00:41So does that mean automakers are going to be like, woohoo, like, let's go ahead and, like, change everything that we've done over the last how many years or decades?
00:49Or are they going to say, wait a minute, you know, that horse has left the barn, if you will, and we're not going to change anything.
00:56We sell globally.
00:57There are restrictions maybe in other markets.
00:59Like, how does this play out?
01:00Because design changes cost an automaker something, right?
01:05It does.
01:06But so far, the reaction, particularly to zeroing out the penalties, is they're overjoyed.
01:12Because now they can sell their most gas guzzling and most profitable vehicles, large SUVs, big pickup trucks, and make more money.
01:22So that's good news to them.
01:25In fact, today, GM's CFO, Paul Jacobson, was speaking at a UBS conference, and he compared the loss of the $7,500 tax credit to the gain they get from zeroing out penalties for not meeting those standards.
01:40And he referred to that $7,500 tax credit as a drop in the bucket compared to the cost of the penalties they've faced.
01:48GM alone had set aside $2 billion last year to buy credits from companies like Tesla to remain compliant with those standards.
01:57Carbon credits, right?
01:58Is that what we're talking about?
01:59They are fuel economy and emission credits.
02:03You have to buy them.
02:05If you want to sell a big SUV, you have to either sell an equivalent EV, or if you can't do that, you buy credits from companies that are selling EVs.
02:14And that's how you balance it out and meet the regulations.
02:17Okay, so help us keep track of all the numbers here, because we're talking about fuel economy credits.
02:20We're talking about these companies saving money as a result of these penalties not being in place.
02:25But how much have they allotted and allocated for tariffs this year?
02:30Right.
02:31So it is a changing dynamic.
02:35Initially, they thought the tariff bite would be worse.
02:38But it is still in the billions, Tim.
02:42It's not chump change.
02:43But the promise they see of not having to meet regulatory credit financial obligations is balancing that out for them.
02:53I mean, you know, at today's White House announcement, you're getting, you know, big automotive executives.
03:00Ford CEO Jim Farley is there supporting these latest moves by the Trump administration.
03:06So net-net, if we're just thinking about the cost that these automakers have this year and next year, as a result of tariffs, as a result of this penalty being removed, are they kind of in the same place they were in before the tariffs were announced?
03:22No, not immediately, because they have to now dismantle or scale back this massive EV infrastructure they built.
03:30They don't need all these factories.
03:31Again, Paul Jacobson today saying they geared up to build a million EVs, and they're selling about 150,000.
03:38So they have to take, as GM already did in the third quarter, they have to take these big charges to write off the billions in investment and not go forward with some programs or some plans.
03:48Keith, forgive me.
03:49We only have a couple of minutes.
03:50But Carol and I were talking about this.
03:52It's like, you know, you described his whiplash.
03:55What happens if the next president gets into office and says, wait a second, the Biden administration had it right.
04:01Guys, do they have to go and rebuild all this infrastructure?
04:06Well, I think a lot of the brick and mortar is up and standing there, so they would have to crank it up again.
04:12But, you know, they're cutting programs, too.
04:14There's models that are going away or that will never hit the market, and they'd have to get those going again.
04:19So this is the problem with the industry being led by regulation is you can go back and forth like this.
04:26So what's better for consumers?
04:27Because I know initially, and I'm looking at the reporting that you and the team have done on all of this, that apparently the standards that are being targeted by President Trump were predicted to have cut gasoline consumption by almost 70 billion gallons through 2050.
04:42And according to the Biden administration, would have saved U.S. consumers more than $23 billion in fuel costs.
04:47That would translate to about $600 in savings over an individual vehicle's lifetime.
04:52So I don't know.
04:54Will the vehicles cost a lot less now?
04:57Are they going to spend gas prices maybe go?
05:00Like, I don't know.
05:00How do you unpack that?
05:02Well, the Trump administration in their press release today is saying this will lower the cost of a car by $1,000 for the average family, taking billions out of the cost, because they feel prices will go down now.
05:17Since EVs are more expensive than traditional internal combustion engine cars, the average price of a car should come down.
05:24And critics are saying, you know, now, because the auto industry will sell more gas guzzlers, that means consumers will be paying more at the pump, not just paying a higher price at the pump, but buying more gas because they don't have the option of going EV.
05:40So when the – I don't know what insight you have on this, and I know you guys have a ton, but I am curious when Ford and GM and Stellantis, their heads are going and meeting with the president.
05:49I mean, what do they care more about?
05:50Is it these standards or like the tariff situation and just got about 30, 40 seconds?
05:57Yeah, I mean, they don't love tariffs, but they're figuring out how to bake them into their cost structure.
06:02So, you know, almost a year end, they're getting used to that.
06:06They really like less regulation.
06:07That's an evergreen, I think, with industry in general.
06:11So if the cafe, the fuel economy standards are lowered, they're happy with that.
06:17God, it's just wild.
06:18State of California, not going to come and say you've got to do certain things?
06:23Yeah, like what about California?
06:24Just 30 seconds.
06:27Yeah, you know, California is sort of in the balance here, and right now, you know, they're trying to just continue to be the leader in this, but they're kind of losing the battle at the moment.
06:38So, you know, you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader in this, but you're going to be the leader
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