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Thanks to tougher fuel economy regulations enacted by the Obama administration the 40mpg mark has quickly become the industry’s new standard, but a new debate is raging on for fuel economy standards beyond the 2016.
President Obama’s updated fuel economy regulations officially went into effect on January 1, mandating a 35.5mpg corporate fleet average by 2016. However, the standards for beyond 2016 have yet to be officially set, with some groups calling for a CAFE standard as high as 62mpg.
Current regulations call for CAFE standards to fall between 47mpg and 62mpg by the 2025 model year, with plenty of debate where the official number should fall. Auto industry reps are pushing for the lower 47mpg standard – representing a three percent economy increase per year – whereas environmentalists want a six percent per year ramp-up to 62mpg.
Although reduced oil consumption is at the root of the proposed CAFE regulations, the final decision will likely come down to dollars and cents. The EPA and NHTSA estimate that the push to 62mpg would only raise the average vehicle price between $2,800-$3,500, but other estimates have the price increase at $10,000 per vehicle.
“We will be very mindful — and I underline ‘mindful’ — of the consumer throughout this process,” EPA official Margo Oge said. “Unless people buy these new clean cars and trucks, and buy them in large numbers, everyone loses.”
Whatever the price increase, the 62mpg standard would require all vehicles to cut weight by 26 percent and for hybrid vehicles to account for 44 to 68 percent of all new car sales.
Impact on sales
Although the price of technology typically falls with expanded use, that might not be the case with the automobile industry. Technologies like turbocharging and direct-injection are already widely used throughout the auto industry, so prices aren’t likely to fall much past today’s levels. And while the costs of some hybrid components are dropping, the cost of raw materials are not, so heavy discounting isn’t expected in the hybrid arena either.
Throw in the use of light-weight materials to meet the proposed goals and the cost of buying a vehicle could become prohibitive to the average buyer. The Alliance of Automobile Manufacturers has warned that a 62mpg would reduce overall sales by 25 percent and cost the industry 220,000 jobs.
It remains to be seen which side of the CAFE argument will prevail, but a decision on the matter must be handed down by July 2012.
President Obama’s updated fuel economy regulations officially went into effect on January 1, mandating a 35.5mpg corporate fleet average by 2016. However, the standards for beyond 2016 have yet to be officially set, with some groups calling for a CAFE standard as high as 62mpg.
Current regulations call for CAFE standards to fall between 47mpg and 62mpg by the 2025 model year, with plenty of debate where the official number should fall. Auto industry reps are pushing for the lower 47mpg standard – representing a three percent economy increase per year – whereas environmentalists want a six percent per year ramp-up to 62mpg.
Although reduced oil consumption is at the root of the proposed CAFE regulations, the final decision will likely come down to dollars and cents. The EPA and NHTSA estimate that the push to 62mpg would only raise the average vehicle price between $2,800-$3,500, but other estimates have the price increase at $10,000 per vehicle.
“We will be very mindful — and I underline ‘mindful’ — of the consumer throughout this process,” EPA official Margo Oge said. “Unless people buy these new clean cars and trucks, and buy them in large numbers, everyone loses.”
Whatever the price increase, the 62mpg standard would require all vehicles to cut weight by 26 percent and for hybrid vehicles to account for 44 to 68 percent of all new car sales.
Impact on sales
Although the price of technology typically falls with expanded use, that might not be the case with the automobile industry. Technologies like turbocharging and direct-injection are already widely used throughout the auto industry, so prices aren’t likely to fall much past today’s levels. And while the costs of some hybrid components are dropping, the cost of raw materials are not, so heavy discounting isn’t expected in the hybrid arena either.
Throw in the use of light-weight materials to meet the proposed goals and the cost of buying a vehicle could become prohibitive to the average buyer. The Alliance of Automobile Manufacturers has warned that a 62mpg would reduce overall sales by 25 percent and cost the industry 220,000 jobs.
It remains to be seen which side of the CAFE argument will prevail, but a decision on the matter must be handed down by July 2012.
