The Charged Battle Over Trucking in America

Until recently, Americans have been slow to embrace electric cars. This could be for several reasons, like fond memories of American classics where the RPMs were fast and the engine purred. More practically, it may be because existing infrastructure simply wasn't designed to charge electric vehicles.  

That is changing. If you’ve been in the market for a new vehicle recently, you’ll know that electric vehicles are slowly winning the hearts of Americans, who have been behind Europe in China in EV usage. In the United States, electric car sales reached 1.4 million in 2023, marking a 40% increase from 2022. But not everyone is a fan of the green technology.

An Auto Identity Crisis

The automotive industry is currently grappling with a significant internal conflict. On one side, there is a push toward embracing the growing trend of electric vehicles, driven by environmental concerns and regulatory pressures. On the other side, traditional internal combustion engine (ICE) vehicles remain profitable and in high demand, presenting a challenge for automakers trying to balance these opposing forces.

This tension is exacerbated by California's aggressive regulatory stance, which aims to phase out ICE vehicles in favor of electrification. California has implemented a series of regulations that effectively mandate the transition to electric vehicles. The regulations are set to culminate in a complete ban on the sale of new heavy-duty ICE vehicles by 2036, putting pressure on manufacturers to adapt their production strategies well in advance due to the lengthy lead times required for vehicle development.

And California’s crosshairs end up landing particularly hard on medium and heavy-duty trucks, which are predominantly powered by internal combustion engines.

Heavy Consequences for Heavy Cars

Medium and heavy-duty vehicles encompass a broad category of vehicles with a gross vehicle weight rating exceeding 8,500 pounds. These vehicles are further categorized by weight classes, with Class 8 vehicles being the heaviest, weighing over 33,001 pounds. Put simply, these are semi-trucks. Semis are integral to long-haul freight transportation, making up a significant portion of the logistics industry.

In the automotive market, Class 8 ICE vehicles are distinct from zero-emission vehicles (ZEVs), such as electric trucks. The two are not interchangeable due to differences in price, functionality, and infrastructure requirements. Electric trucks, for example, are significantly more expensive and have limitations in range and payload capacity compared to their ICE counterparts. Additionally, the infrastructure for charging electric trucks is insufficient, further distinguishing these vehicles from ICE trucks in terms of practicality and consumer choice.

The California Air Resources Board (CARB) has implemented stringent regulations to reduce sales of ICE vehicles, pushing manufacturers to increase the production and sale of ZEVs. These regulations include mandates for a growing percentage of ZEV sales and stricter emissions standards, effectively compelling manufacturers to shift away from ICE vehicles.

The Clean Truck Partnership (CTP) agreement further extends these CARB regulations beyond California, requiring manufacturers to adhere to these rules in other states that have adopted or may adopt similar regulations. This agreement obligates manufacturers to comply with these standards even if they face legal challenges, thereby influencing the market dynamics for Class 8 vehicles across the United States.

Carspiracy?

Amidst this regulatory landscape, there are allegations of an industry-wide conspiracy among major truck manufacturers to phase out medium and heavy-duty ICE vehicles.

The market for Class 8 ICE vehicles is dominated by a few key manufacturers, including Daimler, PACCAR, Volvo, and Navistar. These companies collectively hold nearly the entire market share, creating an oligopoly with significant control over production and pricing. A new lawsuit filed by the state of Nebraska and two renewable energy trade associations claims that these key players have coordinated efforts to reduce the availability of ICE vehicles and increase the production of electric alternatives — regardless of consumer demand or the potential for further advancements in ICE technology.

This conspiracy is purportedly formalized through agreements like the "Clean Truck Partnership" with the California Air Resources Board, which obligates manufacturers to comply with California's stringent regulations even if they are legally challenged. The agreement is criticized for being anti-competitive, as it limits consumer choice and is expected to drive up prices for ICE vehicles, thereby subsidizing the transition to electric vehicles at the expense of consumers and states that have not adopted similar regulations.

Antitrust Allegations

The nature of the agreement is characterized as a per se illegal horizontal conspiracy among competitors. In antitrust law, horizontal agreements between competitors to limit production or fix prices are typically deemed inherently illegal because they directly harm market competition.

The complaint argues that this agreement lacks any pro-competitive benefits that might justify its existence. There are no efficiencies or consumer benefits that could outweigh the anti-competitive effects of reduced output and higher prices.

Furthermore, the plaintiffs claim that there is no valid legal defense for the agreement. They characterize it as essentially a private arrangement among competitors to restrict trade, rather than a state-sanctioned regulatory measure. The plaintiffs thus argue to the court that, given that the agreement violates Nebraska's antitrust laws, it should be declared null and void.

What to Expect

This situation poses significant implications for the automotive market, as it could lead to reduced competition, higher prices, and limited vehicle options for consumers, particularly in states like Nebraska that do not intend to follow California's regulatory path. The lawsuit was filed in North Platte, a key transportation hub in Nebraska, which plaintiffs described as "the epicenter for transportation in the state of Nebraska."

Nebraska Attorney General Mike Hilgers argues that eliminating diesel trucks is "practically impossible" and would impose "enormous costs" on Nebraska, raising prices and reducing output, which he considers a "classic antitrust violation." Hilgers also pointed out that electric vehicles have limitations, especially in Nebraska's cold winters, and that they generally have shorter ranges compared to diesel semis.

Jed Mandel, president of the Engine Manufacturers Association, represents the defendants. He stated that the allegations are "without merit" and that they will defend themselves accordingly.

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