Obama's CAFE Fuel Economy Standards to Create Fleet of Tiny, Expensive Vehicles - Car News
Mandate of 35.5 mpg by 2016 is like fighting obesity by outlawing large clothing.
BY STEVE SILER AND MIKE DUSHANE
May 2009
That thud you just heard was the “other shoe” dropping in Washington, D.C.: the Obama administration has used the turmoil in the auto industry as an opportunity to nudge—okay, force—the industry into a new, more environmentally sensitive direction, thus making good on its promise to impose stricter Corporate Average Fuel Economy (CAFE) and tailpipe emissions standards across the automobile industry.
The proposed mandate raises CAFE standards about five percent annually from today’s level of 23 mpg for trucks and 27.5 mpg for cars to 30 mpg for trucks and 39 mpg for passenger cars by 2016, for an average of 35.5 mpg overall. This is roughly four years earlier than the already aggressive 35-mpg goalpost established by Congress in 2007.
As Goes California, So Goes the Country
These standards more or less embrace the strict fuel-economy/emissions proposals that California and about a dozen other states have been trying to implement for years, but which have been blocked by industry lawsuits. The mandate should therefore put many of the existing state lawsuits to rest.
Interestingly, many of the same players that have been trying to block the implementation of the California proposals have embraced the Obama mandate. Ostensibly, this is because the new rules create a uniform standard for the country, instead of allowing states to dictate their own emissions and fuel-economy standards.
“We’re cool with this,” Chrysler spokesman Scott Brown told us in a phone interview. “Most important is that it’s clear instead of piecemeal—we love that.”
Moments later, GM environment and energy spokesman Shad Balch echoed the sentiment, nearly verbatim: “We love it. Now we know what to build,” he told us. “As it was before, it was 14 states doing 14 different things, and we’d have to build products for each.” The new regulations, he said, allow for a “harmonized national product program, which allows for more efficient product planning. For a company trying to become leaner and more efficient, this is a huge step in the right direction.”
There's another force at play here, however, as both Chrysler and GM, recipients of massive government bailout loans, are in no position to voice dissent. Whether they think these policies are sound or not is moot; they will toe the Obama party line because he's their de facto boss. Ford knows it will have to ask for Obama's help if the economy doesn't improve soon, so it is also going along with the hype. Honda and Toyota have been tooting their green horns for years, so they can't very well be the voices of dissent on this issue. Put bluntly, the government is ramming this down the throats of the car companies.
How Do They Do It In Europe?
Senator after senator cites as evidence for the attainability of these standards the vehicles sold in Europe. But car for car, European vehicles aren't meaningfully more efficient. Take the Ford Focus sedan, a car that's comparably sized here and in Europe (although not the same vehicle). In the U.S., the base Focus sedan costs $15,000, has 140 hp, and is rated at 28 mpg combined by the EPA. The base Focus sedan available in Germany costs $20,000 (plus 19-percent tax!), has only 79 hp, and would be rated by the EPA at approximately 30 mpg combined if they were to test it. (Our estimate is based on standard differentials between U.S. and E.U. test numbers.) Paying an extra $5000, Europeans sacrifice 44 percent of their horsepower and gain less than 10 percent in fuel economy.
So why is Europe's fleet so much more efficient overall? The cars people buy there are much smaller. The Focus is one of the tinier mass-market cars sold in the U.S. today, but it's considered a reasonably sized family vehicle in Europe. The average European consumer buys a car a few sizes smaller than a Focus. (This is mainly due to space constraints in cities and smaller roads. If Europeans drove the long distances we do, they likely would drive Hummers, too.) And about half of Europeans buy diesels, which consume around 30-percent less fuel.
How Will They Do It Here?
Car companies have an extensive menu of options to meet the aggressive targets, but each has a high price tag. Diesel engines fired the efficiency revolution in Europe, but tough new particulate emissions laws mean thousands of dollars in extra costs for diesels, which are naturally dirty and require NASA-level catalytic technology to meet current U.S. standards. Hybrid technology works, but economy increases are closer to 30 percent (not the 35 percent needed) and the systems cost $4000 to $10,000, depending on the size of the vehicle. GM won't even talk about the cost of the extended-range electric powertrain in its Volt, but industry sources quote a $10,000 premium per vehicle—and that's for a small car (costs generally increase proportionally with size). Lightweight materials can help a few percent, but they are already in widespread use and further implementation would yield diminishing returns and massive cost.
Forget radical new technologies for 2016 vehicles. It takes roughly six years to take a proven technology to mass production because of the engineering, validation, and tooling needed to attain the durability required in a motor vehicle. Any new technologies for 2016 vehicles will have to be sewn up by next year to make it to the showroom in any quantity.
All of this means that the anticipated $1300 price increase per vehicle quoted by the Obama administration is absurd. Only if consumers trade down a few vehicle sizes and pay $1300 can the targets be met.
Wouldn't U.S. Consumers Buy Fuel Misers if They Could?
We hear a lot from regulators about the increased choice these new regulations will bring, but these choices seem to be answers to questions no consumer is asking. The few vehicles available today that meet these standards don't sell in large quantities because of their small size, poor performance, and high prices. Sales of the Toyota Prius and other hybrids briefly shot up when gas cost $4.00 a gallon, but as soon as gas prices started dropping, so did hybrid sales. Prius sales fell so sharply (even in relation to a market in overall decline) that Toyota last year halted construction of a Prius factory it was building in Mississippi. Today, the best-selling vehicles in the U.S. so far this year are the Ford F-150 and Chevrolet Silverado pickup trucks. Nobody is stopping buyers of these vehicles from purchasing Priuses instead.
Will it Work?
The Obama administration claims the new measures will save 1.8 billion barrels of oil over seven years. But that claim assumes new-car buying habits continue unabated and that people will want to buy expensive, tiny cars. If people instead elect to purchase bigger, cheaper used vehicles, there will be no reduction in consumption; those used vehicles are the same "guzzlers" we're driving today. The fuel economy gains we might have seen with reasonable mileage targets for new vehicles won't be realized if fewer new vehicles are sold. Worse, the auto industry will continue to shrink because of the decrease in new-vehicle sales.
Cost cutting at Car and Driver means we no longer have unlimited access to the Psychic Friends Network, so we can't predict the future. There are a few ways this can play out. If gas prices go up significantly (naturally or with massive taxes)—or if the Obama administration introduces massive tax credits for new vehicle purchases—consumers might actually want to buy the vehicles that have been mandated. But if that doesn't happen, we'll be able to tell you about some great places to buy bigger, more comfortable, more powerful, and safer used cars and trucks.
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The man who cant even change a flat tire thinks he can run the auto companies.
