Business Report: Trump Says He’ll Revoke California’s Auto Emission Standards
Monday, September 23, 2019
Q: Let's start with a story that touches on the big environmental story of the week. The decision by the federal government to revoke California's waiver for automobile emissions. How are the car companies taking this?
A: I think the car companies are in a wait and see mode. Four companies including Ford, VW, Honda and BMW had voluntarily agreed to go with these higher standards set by the state of California that were very similar to the standards set by the Obama administration. The Trump administration is actually rolling back the standards, and they're claiming that auto manufacturers or consumers will actually see a $2,700 improvement in the price of a car by 2025. Those numbers are a little bit spurious because the EPA themselves and other independent organizations at best claimed about a $1,200 differential.
And what the (Trump) administration doesn't understand in this whole process is that car companies absolutely have to do this, because the U.S. auto manufacturers have to be competitive internationally. Countries are setting much higher standards. And yes, we're selling more SUVs and trucks, which is why the push of some of the U.S. manufacturers is to slightly lower standards. They don't want this kind of low standard, because it's going to help them lose car sales outside the United States. But what isn't realized is that consumers are already spending a lot more because of the tariffs on steel and other car inputs on the price of a car.
The administration believes that people are going to buy these cars. The fact of the matter is, it's not. They've replaced these cars between 2013 and 2016. So consumers have new cars and and it's going to be an issue going forward.
Q: If we have lower fuel efficiency standards we're going to be buying more gas over time, and the price of gas is kind of a concern now because of the Saudi oil field attack. What's going on there?
A: This has caused an immediate spike in gas prices around the United States and San Diego, alone, almost 7 cents in one day which is the biggest increase since 2015. The issue here is these oil shocks over 60% of the cost of a gallon of gas, or 50%, is based on the price of oil. So if you have these external shocks it really goes directly to affect the consumer.
This can impact, depending on how high this may go, to about $18 to $20 additional cost per month for a family filling up their car. This is a problem because right now consumers are paying $1,200 in these additional tariff costs, especially with the new tariffs that went into effect in September, for the holiday spending coming into the fall. Consumer confidence is down. Even though the Fed cut interest rates this week by a quarter point, mortgage rates went up to one of the highest levels in the last year. So this could be one of those tipping points and consumers need to be careful.
Q: Here in San Diego we love our theme parks. SeaWorld has been struggling for some time and they had some changes there. What's going on?
A: Their CEO resigned after seven months. They brought him in from Carnival Cruise Lines, to kind of implement a brand new strategy. This is the third CEO they've had in 18 months. Incidentally, their board chair resigned in July. Their president of their San Antonio SeaWorld facility resigned last week. So there's a lot of instability going on at the management level. But as far as performance the park has been in the midst of a turnaround. They've seen increased attendance. They've shifted a little bit more to these kind of special rides.
SeaWorld has finally put a little distance between themselves and Blackfish. PETA hasn't been as aggressive in putting this front and center to the consumers, which did affect attendance. So we're going to see what happens. The CFO is going to take over for the time being and they'll get a new CEO soon.
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