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Trade Group Representing U.S. Auto Suppliers Opposes Setting a Date for the Phase Out Gas-powered Passenger Vehicles

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【Summary】​The Motor & Equipment Manufacturers Association (MEMA), a trade group representing over 1,000 U.S. auto suppliers, is opposing the phase out of gas-powered vehicles stating that the move would cost thousands of jobs in the auto industry. MEMA told a Senate Commerce subcommittee on transportation that the Biden Administration should continue to set regulatory requirements that ensure suppliers keep working to improve internal combustion engines, rather than phasing them out.

Eric Walz    Apr 28, 2021 10:45 AM PT
Trade Group Representing U.S. Auto Suppliers Opposes Setting a Date for the Phase Out Gas-powered Passenger Vehicles
United Auto Workers assemblymen work on 2018 Ford F-150 pickups at the Ford Rouge assembly plant in Dearborn, Mich. (AP Photo/Carlos Osorio)

The Motor & Equipment Manufacturers Association (MEMA), a trade group representing over 1,000 U.S. auto suppliers, is opposing setting a date for the phase out of gas-powered vehicles stating that the move would cost thousands of jobs in the auto industry.

On Tuesday, MEMA told a Senate Commerce subcommittee on transportation that the Biden Administration should continue to set regulatory requirements that ensure suppliers keep working to improve internal combustion engines, rather than phasing them out, which the state of California is aiming to do.

Auto suppliers told U.S. lawmakers on Tuesday expressed their opposition to U.S. lawmakers on Tuesday, warning that a quick shift to all electric vehicles could cost thousands of jobs in the auto industry.

"If we move too quickly to a fully electrified fleet we could lose 30% of the supplier jobs in this country," said Ann Wilson, MEMA's senior vice president of government affairs. 

California Governor Gavin Newsom signed an executive order in Sept 2020 requiring sales of all new passenger vehicles in the state to be zero-emission by 2035, as well as additional measures to eliminate harmful emissions from the transportation sector in the state. 

Last week, the governors of 12 U.S. states including California, New York, Massachusetts and North Carolina called on President Joe Biden to back ending sales of new gasoline-powered vehicles by 2035 in a dramatic shift away from fossil fuels.

California already has the strictest emissions standards for motor vehicles on its roads, as well as the highest number of electric vehicle sales out of all 50 states. The transportation sector is responsible for more than half of all of California's carbon pollution, including 80% of smog-forming pollutants and 95% of toxic diesel emissions, the Governor's office said. 

However when Newsom signed the executive order, Biden's campaign said he did not support such a bold move.

The auto industry is a major part of the U.S. economy. Automotive parts manufacturing is the nation's largest manufacturing sector, employing more than 907,000 people. The industry accounts for around 2.5% of the U.S. gross domestic product, based on research conducted by IHS Markit and commissioned by MEMA. In addition, motor vehicle parts suppliers generate a total direct and indirect employment of 4.26 million jobs.

It's still not clear what the impact would be for suppliers once automakers begin to phase out gas vehicles, but electric vehicles use far fewer parts than a conventional internal combustion engine vehicles, so its likely that many of the companies that the MEMA represents will be impacted over the long term.

"Engines, transmissions, after-treatment systems, and other parts will simply not be manufactured for battery electric and fuel cell vehicles," Wison told a Senate Commerce subcommittee on Tuesday.

The Biden administration is currently promoting its unprecedented $2.3 trillion infrastructure plan. The plan calls for $174 billion in spending and tax credits to boost electric vehicle production (EVs) and the buildout of charging networks to support millions of EVs that could be on the roads in the next decade. However, Biden's plan does not call for phasing out gasoline-powered passenger vehicles. 

Wilson told the senate panel that new gasoline-powered vehicles "will likely be on the road for an additional 20 years."

Wilson's prediction however does not reflect that of U.S. automaker General Motors or the state of California. In January, GM announced on Thursday that it plans to become a carbon neutral company by 2040. To reach its goal, the automaker plans to phase out internal combustion engine models, including light-duty trucks and SUVs by 2035 in what will be a historic move for the company that has been building gas-powered vehicles since 1908.

"General Motors is joining governments and companies around the globe working to establish a safer, greener and better world," said GM Chairman and CEO Mary Barra earlier this year. "We encourage others to follow suit and make a significant impact on our industry and on the economy as a whole."

Swedish automaker Volvo Cars also announced last month that it will transition to fully-electric vehicles by 2030, five years earlier than GM. In the interim, Volvo aims for hybrid models to make up 50% of its model lineup by 2025. Both Volvo's and GM's transition to become fully electric car companies is part of an ambitious plan to address climate change, buts its also a way to adapt to a changing auto industry.

However despite the concerns of the MEMA, GM and Ford Motor Co are both under pressure to electrify their model lineups to remain competitive in a changing auto industry. 

Over the last several years, electric automaker Tesla has risen to become the world's most valuable automaker by far with market cap topping $700 billion. Tesla's rise has prompted automakers around the world to introduce new electric vehicles to stay competitive. For proponents of EVs, its the part suppliers that must adapt.

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