New 54.5-MPG Fuel
Economy Standard Moving Toward 2025 Reality
The U.S. Department of Transportation and the Environmental Protection Agency came one step closer to a utopian vision of future transportation late last fall. Both federal agencies released joint formal proposals to adopt regulations setting Corporate Average Fuel Economy averages of 54.5 miles per gallon in combined city/highway fuel economy by 2025.
The Obama administration in 2010, already with a legacy of envelope-pushing environmental initiatives, suggested this new standard. The proposed 54.5-mpg CAFE standard, to which all mainstream auto manufacturers will be bound, is well in excess of the 35.5-mpg goal set by current CAFE legislation that runs through 2017.
Not long ago, it would have been hard to image anything but kicking and screaming from the automakers about the moonshot ambition of 54.5 mpg. But in July, the administration and 13 car companies broadly agreed to this CAFE standard. Some analysts said the automakers, pressured from environmental interests on one side and political interests on the other, may have had little choice but to agree.
The 893-page summary issued by the DOT and EPA suggests the rules are far from simple. The major argument points will be how heavily consumers shoulder the costs of the new standards, as well as the potential impact on safety that the proposed 20172025 CAFE regulations would appear to dictate on vehicles becoming smaller and lighter.
The DOT and EPA analysis of the cost of the program is $2,023 per vehicle in 2025. But, the agencies stressed, a 54-mpg vehicle in 2025 will save its owner an average of up to $6,600 in fuel costs over the lifetime of the vehicle, or $4,400 after factoring in the cost of the new high-economy technology.
“Overall,” the agencies added when addressing reporters, “the net benefit to society from this rule would total more than $420 billion over the lifetime of the vehicles sold in MY 2017-2025.”
Many industry watchers fear the new fuel-economy regulations — and even those in place through 2016 — will drive up the cost of new vehicles to the point consumers are scared away from showrooms. The National Auto Dealers Association expressed dissatisfaction, suggesting that the new standards not only could dampen sales volumes, but also artificially limit buyers’ choices.
The Detroit News has calculated the new fuel-economy regulations will cost the auto industry $157 billion. Detroit’s automakers will be hit for bills that range from $37.8 billion for General Motors Co. to $9.7 billion for the Chrysler Group LLC. Ford Motor Co. will pay a total of $29.4 billion to get its fleet average to 54.5 mpg. Japanese automakers, with fewer large models in their lineups and a tradition for fuel-efficiency, would not be hit as hard by the proposed new CAFE rules. Toyota Motor Corp. would spend $23.2 billion; Honda Motor Co. Ltd. $15.3 billion and Nissan Motor Co. Ltd. spend $15 million.
Then there’s the question of actually implementing the rules. Some already are looking askance at the governing formula that bases vehicles’ allowable carbon-dioxide emissions — the output of which is directly proportional to fuel economy — on the vehicle’s “footprint” as outlined by its four tires. Larger vehicles will be allowed to consume more fuel and skeptics say the footprint metric might inspire a new generation of deliberately bigger vehicles rather than smaller ones. Some say the footprint system seems tilted in favor of the Detroit automakers, which derive a large proportion of their profits and working capital from pickup trucks.
The standards are likely to pass with scant adjustment. But 2017 is a long time and at least one presidential election away, so even if approved, there is no guarantee the rules will stand, particularly considering the DOT and EPA have built in a midterm review that presumably will evaluate whether the ultimate 54.5-mpg goal is costeffectively achievable by 2025.
To read the regulations set forward go to: http://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/2017-25_cafe_nprm.pdf