Increased Consumer Costs in US Automotive Industry

Under the Presidency of Donald Trump, the American Automotive Industry, and, by extension, the Canadian Automotive Industry is expected to take a hit over the next few years. According to a study recently published by the Indiana University, the industry itself is likely to experience a drop in both shares and profits in the foreseeable future as well as an increased unemployment rate, varying from company to company. Furthermore, the study concluded that if automotive regulations are not altered, U.S. consumers can expect increased costs in the purchase of premium vehicles as well as in fuel utilization.

American automakers, and those who have a vested interest in the automotive market in the United States, have called for the Trump administration to re-examine the rules that constrict their production standards and reform them to the reality of the market, with Mark Fields, the CEO of Ford Motor Co. threatening that over 1 million American jobs are at stake. His statement is directly in contradiction with the study by Indiana University, which claims that the unemployment rates in the U.S. should peak around 2021 at approximately 150 000 jobs, with a longer-term benefit of an increase of jobs by 2031. The study additionally states that current fuel economy and emissions targets will, over the long-term, cost customers a premium of over $1800 per vehicle by 2025. This also follows the trend that with the economy being what it is, consumers are looking to purchase less costly vehicles, opting for endurance over luxury.

John Graham, the co-author of the Indiana University study, entitles A Microeconomic Study of Federal and State Automotive Regulations, suggests numerous ways in which… One such example is for legislatures to consider cost-effective methods to phases out older vehicles, which would both increase profits for auto dealers while reducing GHG emissions, and to refine performance standards in order to make the entire industry more cost-effective for production and consumers alike. The study also makes it clear the responsibility for improvement does not rest with one party in particular but rather is something shared by analysts, legislators, and regulators, by giving recommendations for reformation to each of them.

While the study admits that there are some factors not examined in its contents, such as numerous environmental restrictions as well as an overall societal benefit, the study is clear that there needs to be an examination and a reformation in the auto industry which may seem detrimental in the short-term but will have numerous long-term benefits.

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