The Road to Regulation

Patrick Lucas

Associate Editor

Loyola University Chicago School of Law, JD 2022

The implications arising from fuel consumption and greenhouse gas emissions standards set by the Environmental Protection Agency (“EPA”) and the Department of Transportation (“DOT”) in the early 2010s spelled out a cautionary tale for automotive manufacturers wondering how to comply with increasingly strict regulations.

In my life before law school, I was an automotive journalist. My job was to drive the newest passenger cars, trucks, SUVs and crossovers, and give my impressions. Those impressions turned into reviews and helped voice the publication’s official opinion on a particular vehicle.

Some of those vehicles were admittedly boring. Some were nice. Some were expensive. Some were fast. Regardless of any shortcomings or over-indulgences, however, these vehicles were engineering and technological marvels. The automotive industry carries with it a history of innovation—in mobility, design, entertainment, safety and efficiency.

For five years I followed these developments from their infancy—at exclusive, invite-only events, to their global debuts at auto shows around the world and eventually, the showroom floor.

Construction ahead

When my career started in 2012, so too had begun a crucial time of regulatory oversight in the automotive industry; one that still has massive implications on sales, reputations, and market dominance. It arose, in part, from a fairly simple directive from the DOT and the EPA: revamp the fuel economy information provided on window stickers, or “Monroney stickers”, of new passenger vehicles on sale to the public. The information provided would be more detailed than it had ever been before, and would offer insight into annual fuel costs, environmental impact from smog emissions, and fuel or electricity consumed per 100 miles of driving.

This directive came on the heels of another, perhaps more historic regulation, issued just a few years earlier. Again a joint effort by the DOT and the EPA, this regulation sought to reduce greenhouse gas emissions and fuel consumption of the entire light-duty passenger car and truck industry throughout the United States by 2030. Under authority of the reduce harmful pollutants, drive innovation and save consumers money.

These regulations, however, had a massive effect on the “business” of the automotive industry itself. Every major manufacturer was forced to reconsider or entirely restructure their future plans. Violation of these standards would result in punishments, fees, and bad publicity. In an industry so built upon public perception, falling into the bad graces of customers can spell the death of a brand.  

This new focus on cleaner and more efficient transportation was driven, in large part, by the regulatory actions of the EPA and NHTSA. It brought with it extraordinary innovation, and troubling controversy. And it continues to do so even a decade later.

A tale of two companies

During my career, I witnessed the rise of the mainstream electric vehicle (“EV”), including the true arrival of Tesla as a major player in the automotive industry. Boasting an all-electric driving range over 200 miles and zero tailpipe emissions with the Model S, Tesla was fully compliant with the new EPA and DOT regulations from day one. It was a company years ahead of its competitors, and seemingly built for the future.

Contrast this with 2015’s Dieselgate scandal, in which Volkswagen was exposed for cheating their greenhouse gas emissions numbers for most of the diesel-powered vehicles in their fleet. The EPA notified Volkswagen of their violation of the Clean Air Act, among a host of other charges. For their attempts to “comply” with regulations, Volkswagen suffered to the fullest extent of the law.

Where Tesla was hailed as an innovator and a disruptor who forever changed the automotive industry, Volkswagen faced billions of dollars in fines and arguably lost billions more in reputational damage.

When regulations of such magnitude are handed down, especially on such a public stage as the automotive industry, compliance can’t be faked. Standards are set, and they must be met. Regulations are sometimes strict, and often unforgiving. Yet even when compliance requires great effort, the potential damage from noncompliance far outweighs it.

On the road to compliance, there are no shortcuts.