Fuel Standards

Days after reinstating fines against automakers that failed to meet fuel economy standards, the National Highway Traffic Safety Administration (NHTSA) says 49 miles per gallon will be the lowest acceptable fuel efficiency for passenger cars and light trucks by 2026.

The agency can't predict how gas prices will change until then, but it stated that the new Corporate Average Fuel Economy (CAFE) standards will make vehicle miles per gallon more efficient, save consumers money at the pump, and reduce transportation emissions. 

The move should also make the White House happy. President Biden previously pledged to cut greenhouse gas emissions and reduce the nation’s dependence on oil, reducing fuel use by more than 200 billion gallons through 2050. The agency’s goals may seem lofty, but CAFE standards have worked their magic so far. Since they were signed into law in 1975, the standards have reduced American oil consumption by 25%, or approximately 5 million barrels a day.

For consumers, the new standards are somewhat of a wash. The NHTSA estimates that its action could reduce average fuel outlays over the lifetimes of model year 2029 vehicles by about $1,387. However, they will also increase the average cost of those vehicles by about $1,087.

“Today's rule means that American families will be able to drive further before they have to fill up, saving hundreds of dollars per year,” said U.S. Transportation Secretary Pete Buttigieg. “These improvements will also make our country less vulnerable to global shifts in the price of oil, and protect communities by reducing carbon emissions by 2.5 billion metric tons.”

Automakers have some work to do

In his remarks, Buttigieg said the average fuel economy of the U.S. 2021 vehicle fleet is 36 mpg. In the list of the 2022 Best and Worst Fuel Economy Vehicles by class, the closest a gas-powered vehicle comes to hitting that current mark among Minicompacts is the MINI Cooper Convertible, with a combined (city and highway) mpg of 32. As for Two-Seaters, the Mazda MX-5 tops the list at 30 mpg. Volvo’s V90CC B6 AWD leads the Midsize Station Wagon class at 25 mpg.

Doing an apples-to-apples comparison for the worst fuel economy vehicles by class, it's the pricier cars that rule the roost. The $300,000+ Bentley Continental GT Speed Convertible brings up the rear in the Minicompacts category, with only 14 mpg. Among Two-Seaters, the Bugatti Chiron Pur Sport and Super Sport average a paltry 9 mpg. Compared to Volvo’s mpg victory among Midsize Station Wagons, the Rolls-Royce Cullinan ranks as the worst with 14 mpg.

The National Highway Traffic Safety Administration (NHTSA) has come down hard on automakers that manufacture gas-guzzling vehicles. In a newly released ruling, the agency stated that it is reinstating fines on automakers that failed to meet Corporate Average Fuel Economy (CAFE) requirements on 2019 models and later. 

In 2012, the NHTSA established standards that required fuel economy levels for 2017-2021 model passenger cars and light trucks to be between 40.3-41.0 mpg. The Obama administration modified the policy in 2016, applying it to 2019 and later model vehicles. Current goals are set out as far as 2035, when the CAFE target is 57.6 mpg for passenger cars.

For consumers, improving fuel efficiency is a no-brainer. However, there have been challenges from industry groups who claim that pushing innovation in that direction will come at a cost. Adding fines into the equation muddles the matter even further.

The industry estimates that the newly reinstated fines could cost carmakers up to $1 billion each year, and those extra costs could affect consumers.

“The imposition of [penalties to] 2019 to 2021 vehicles actually could have deleterious environmental impacts: penalties that lead to increases in the prices of newer vehicles could discourage consumers from purchasing more efficient, cleaner vehicles.” 

What automakers need to improve?

When ConsumerAffairs took a look at the Department of Transportation’s CAFE dashboard, we found that some automakers are close to hitting fuel targets and others have a long way to go.

For example, for 2020 model cars, GM missed the mark by about 4 mpg. Meanwhile, Daimler (Mercedes-Benz) missed its 41.4 mpg goal by about 7.5 mpg. 

Needless to say, manufacturers that put a lot of their eggs in the electric vehicle basket are happy they did. As an example, Tesla – which often finds itself on the bad side of the NHTSA –  beat its mpg goal by nearly 700 mpg.

General Motors and electrification start-up Nikola have announced a strategic partnership that advances GM’s entry into alternative fuels and is seen as a win-win by the automotive industry.

Nikola is a manufacturer of electric trucks and the strategic partnership will give it access to GM’s Hydrotec fuel cell and Ultium battery systems. In return, GM will take an 11 percent stake in Nikola.

Nikola will initially use the GM technology in its Badger pickup trucks. In addition to the Badger, the deal is expected to benefit the Nikola Tre, Nikola One, Nikola Two and NZT projects. The Badger, which is currently in development, is a vehicle designed to operate 100 percent on batteries, fuel cells, or both.

"This strategic partnership with Nikola, an industry leading disrupter, continues the broader deployment of General Motors' all-new Ultium battery and Hydrotec fuel cell systems," said GM CEO Mary Barra. "We are growing our presence in multiple high-volume EV segments while building scale to lower battery and fuel cell costs and increase profitability. In addition, applying General Motors' electrified technology solutions to the heavy-duty class of commercial vehicles is another important step in fulfilling our vision of a zero-emissions future."

New attention on fuel cells

GM is also seen as benefiting from the deal because its fuel cell technology will also be used in Nikola’s semi-truck product line. With the recent focus on battery-powered vehicles, and the meteoric rise in Tesla’s stock price, Brian Moody, executive editor at AutoTrader, says fuel cells haven’t gotten the attention they deserve.

“In other applications, fuel cells are seen as a reliable energy alternative, but only a handful of automakers seem interested,” Moody said in an email to ConsumerAffairs. “Right now, Honda, Hyundai and Toyota have fuel cell powered cars available to consumers in some regions.”

Powering up a fuel cell vehicle isn’t that different than how consumers refuel a gasoline engine. And in an advantage over batteries the refill rate is much faster than most plug-in electrics.

“By GM partnering with Honda and now Nikola, it shows they’re serious about alternative fuel vehicles,” Moody said.

Benefits for Nikola

From Nikola’s perspective, the company says it immediately gets decades of supplier and manufacturing knowledge, validated and tested production-ready EV propulsion, world-class engineering, and investor confidence. 

The company has previously said it expects at least one version of the Badger to be on sale throughout the U.S. by 2022.

A new study commissioned by a consumer group finds that 79 percent of Americans support higher federal fuel economy standards for cars, but the U.S. Transportation Department may be heading in the opposite direction.

The DOT said today that it may revise fuel efficiency requirements starting with the 2021 model year, a year earlier than expected, and may adopt lower standards through 2025. That's in response to a review ordered by President Trump.

The Obama administration negotiated new standards in 2011, aimed at doubling average fleet-wide fuel efficiency to about 50 miles per gallon by 2025. Auto manufacturers have been lobbying to have the standards relaxed ever since.

The Alliance of Automobile Manufacturers, a trade group, has argued that "facts need to drive public policy, including data on consumer sales, gas prices and costs of technology" in determining the final standards.

Consumers may differ

But the survey commissioned by the Consumer Federation of America (CFA) found that a large majority (79%) of those intending to purchase a motor vehicle in the future, said that the vehicle’s fuel economy is important in the purchase of their next vehicle and indicated that they would be willing to pay somewhat more for a car that helps them save money on fuel. 

In part, this concern may reflect the belief that gas prices will rise in the future, CFA said. When asked to guess the price of gasoline in five years, the average price given by all respondents was $3.90.  Today’s average price is only $2.27.

CFA also released an analysis of actual fuel efficiency and increases in miles per gallon (MPGs) among newly introduced vehicles. It shows that, for consumers, improvements in MPG more than pay for themselves and that consumers value fuel efficiency. 

“Rolling back the standards at this point would not only hurt America’s already financially beleaguered consumers, but they would hamper vehicle sales and put U.S. car companies at a distinct competitive disadvantage to the Asian car companies who will meet the standards,” said CFA's Jack Gillis. 

Major consumer expense

Higher fuel economy standards have already saved consumers "trillions of dollars" and helped grow the economy, CFA said. 

“Fuel economy standards are one of the biggest consumer pocketbook issues the Trump Administration faces,” said Dr. Mark Cooper, author of a CFA report, Pocketbook Savings, Macroeconomic Growth and Other Public Benefits of Fuel Economy Standards.

The report notes that gasoline and diesel fuel oil, the two sources of energy most directly affected by Department of Transportation regulations, are a major consumer expense, representing over 3 percent of total household expenditures. Typically, it is about the 6th largest household expense.

The higher standards under fire by the auto industry have saved consumers close to $500 billion, Cooper said.

The Trump Administration is thinking of giving a pass to luxury automakers whose cars fall short of U.S. fuel economy standards. Brands like Jaguar, BMW, and Porsche would be the beneficiaries. 

The luxury marques have paid the biggest fines in the past, largely because their cars tend to be gas-guzzlers and they don't make super-efficient compacts -- which would help keep their average down -- or light trucks, which are largely exempt from the regulations.

The fines that have been levied in the past are scheduled to more than double in the 2019 model year, but a statement from the National Highway Traffic Safety Administration (NHTSA) on Friday said the agency may give the carmakers a break, Bloomberg reported.

"Seeking comment on the inflationary adjustment will allow stakeholders to provide input and provide NHTSA additional information to inform the agency's decision regarding how the CAFE civil penalty should be adjusted for inflation," NHTSA said in a statement.

"Good news for the auto industry"

Since the mid-1970s, automakers have been fined $55 for each mile-per-gallon shortfall, multiplied by the number of vehicles sold in that model year. Congress in 2015 instructed all federal agencies to update their civil penalty formulas to reflect inflation, and NHTSA proposed to increase the fine to $140 per mpg shortfall, per vehicle sold.

Automakers have paid nearly $900 million since 1975, when the fuel economy program went into effect. 

The Alliance of Automobile Manufacturers praised the NHTSA announcement as "good news for the auto industry and consumers."

The automakers' pleas have fallen on deaf ears in the past, but the Trump White House has been busily slashing regulations and the auto industry appears to be next in line. The Trump Administration is also giving automakers extra time to dispute EPA standards for curbing greenhouse gas emissions.

The new head of the Environmental Protection Agency says an announcement on fuel efficiency standards will be released "very soon" as the agency works to "reduce regulatory uncertainty."

Scott Pruitt also told CNBC that he thinks Congress should decide whether carbon dioxide is a harmful pollutant. The Supreme Court ruled in 2007 that greenhouse gases are an air pollutant that can be regulated under the Clean Air Act, but Pruitt said Congress has never signed off on the decision. 

"Nowhere in the continuum, nowhere in the equation, has Congress spoken. The legislative branch has not addressed this issue at all," he told CNBC, although the Clean Air Act was passed by Congress in 1963 and amended by Congress in 1970, 1977, and 1990.

It is widely expected that Pruitt will scrap tough fuel efficiency standards enacted during the Obama Administration, a decision consumer groups say would be a mistake.

Would help imports

The Consumer Federation of America issued a statement today warning that American auto manufacturers would be at risk of losing market share to imports if the fuel economy standards were weakened. 

“Each year the fleet increased by an average of 7.1 percent through 2015, which is truly remarkable,” said the CFA's Jack Gillis. "[M]ake no mistake: our domestic automakers have much to risk if they fail to use fuel saving technology available today in all their vehicles.”

Carmakers, like other industries, have been pushing hard for loosened regulations. Their argument may be buttressed by a new report that finds that U.S. cars and light trucks from the 2016 model year will be the first to fall short of fuel economy targets in more than a decade.

The National Highway Traffic Safety Administration is forecasting that 2016 models will average 32.1 miles per gallon, below the target of 32.8, according to an Automotive News report. The agency forecasts another shortfall in model year 2017 of 31.8 miles per gallon compared to a projected target of 33.

Carmakers have lost out on a last-minute bid to loosen fuel economy standards through the 2025 model year. The Environmental Protection Agency told industry lobbyists earlier this week that it will not extend the deadline for a review of the standards, indicating the agency will push ahead with a plan to make the rules final before the Obama administration leaves office Jan. 20.

Donald Trump's pick for the job of EPA chief, Oklahoma Attorney General Scott Pruitt, has been a critic of President Obama's efforts to regulate greenhouse gas emissions as a way of curbing climate change and the auto industry has been hoping he will agree to loosen the tough fuel economy standards.

The EPA's action won praise from environmentalists and consumer groups. Consumers Union, the policy and mobilization arm of Consumer Reports, called it a victory for consumers who will benefit from lower fuel costs and protection from future spikes in gas prices.

"Save real money"

“This plan will ensure new-car buyers save real money and have more options for clean, fuel-efficient vehicles over the next decade,” said Shannon Baker–Branstetter, energy policy counsel for Consumers Union. “We see a lot of advancements in car technologies and features every year, but fuel efficiency investments are unique in that they pay for themselves and keep more money in the pockets of consumers.”

A recent Consumers Union analysis found that under the 2025 standards, consumers would benefit from net savings of $3,200 per car and $5,700 per truck. The fuel savings are significant enough that, even with continuing low gas prices, the fuel savings would outweigh technology costs starting with the very first car loan payment and continuing after that.

If gas prices rise, the savings will be even greater – up to $5,700 per car and $8,200 per truck, the analysis found. Depending on the car-truck vehicle mix, EPA’s latest analysis found that net consumer benefits would total between $60 billion and $100 billion.

"Sadly predictable"

The Association of Global Automakers, a trade group that had petitioned the agency for a change along with Alliance of Automobile Manufacturers, called the EPA’s decision “sadly predictable.”

“EPA's hurried determination, and lack of transparency, only increases suspicions surrounding the agency's decision, undermining confidence in its objectivity and impartiality,” John Bozzella, president and CEO of the group, said, according to an Automotive News report.

Carmakers say the fuel-economy standards will be difficult to meet and will drive up the price of cars. But in comments filed today, Consumers Union notes that EPA’s proposed determination is based on extensive technical analysis that found the standards, first proposed in 2012, to be achievable and cost-effective.

Top attribute

Consumers Union also noted that fuel economy is the number one attribute vehicle owners would like to see improved, according to a  June 2016 survey, conducted by the Consumer Reports National Research Center.

Fuel economy beat out purchase price, connectivity, vehicle comfort, safety, cargo space, reliability, horsepower, vehicle size, off-road capability, style, and handling.  And even consumers who plan to buy a SUV still want their next vehicle to have better fuel economy. 

The survey findings also show that strong majorities of Americans believe increasing fuel efficiency is important (84%) and that the government should continue to set standards for higher fuel economy in cars and trucks (70%) - a belief supported by majorities of both Republicans and Democrats.

“Automakers are already outpacing the current fuel efficiency standards, all while achieving record sales and ever-increasing profits. By finalizing these standards, EPA will provide automakers the certainty they need to continue building the efficient fleet that consumers want and expect,” said Baker-Branstetter.

In a change of heart, the National Highway Traffic Safety Administration (NHTSA) has agreed to push back the date that it will start imposing penalties on carmakers for failing to meet new fuel economy standards.

In response to pleas from several automotive companies and their advocacy groups, the government agency has agreed to hold the 2019 models to the new standard.

NHTSA said it is simply bowing to the reality that carmakers design their products well in advance. Jack Nerad, executive market analyst for Kelley Blue Book, says it was the right move.

“In a month of political posturing by outgoing and incoming administrations, this action by the National Highway Traffic Safety Administration adds a needed dose of reality to the conversation around fuel economy and emissions,” Nerad said in an email to ConsumerAffairs.

By delaying the penalties until the 2019 model year, Nerad says the agency is giving the auto industry some “much-needed breathing room” in their efforts to meet standards that are made more difficult to reach by the fact that fuel is reasonably inexpensive and expected to stay that way for at least a few years to come.

Low gas prices equal lower mileage ratings

Automakers have discovered that it is much harder to sell smaller, more fuel-efficient cars when gasoline prices are barely over $2 a gallon. Instead, consumers have been buying less-efficient trucks and SUVs.

An automaker's fuel economy rating is based on the cumulative mileage rating of its entire fleet. The more trucks and SUVs a company sells, the lower its rating.

As recently as August, NHTSA and the Environmental Protection Agency (EPA) jointly finalized fuel economy and pollution standards, sticking with the original deadline.

In extending its deadline, NHTSA also granted a request by carmakers for a way to clear up discrepancies between the two different mandates administered by the two separate government agencies.

2-19-2016 -- Fire deaths in recalled Jeeps far exceed Takata airbag deaths, safety advocates note Center for Auto Safety calls on feds to reopen investigation into Jeep fire deaths

1-18-2016 --Latest Jeep fire lawsuit accuses Chrysler of foot-dragging in recall The company's delaying tactics continued as the death toll mounted, suit argues

7-26-2015 --Recall issues may cost Fiat Chrysler $105 million Consent order may be announced as early as Monday

7-4-2015 -- Fiat Chrysler waits to learn its fate after hearing before safety regulators The company faces up to $800 million in fines and could be ordered to buy back some vehicles

5-18-2015 -- Feds call Fiat Chrysler onto the carpet, could order buyback of vehicles deemed unsafe  Federal safety regulators have "significant concerns" about Chrysler's handling of safety recalls.

4-22-2015 -- Jeep fire case may be reopened as highway safety agency gets into high gear New NHTSA director wants automakers to be more "proactive" in addressing safety issues.

4-10-2015 -- Feds may reopen botched Jeep fire investigation It could mean more extensive modifications to millions of older Jeep SUVs.

4-2-2015 --Jury awards $150 million in fire Jeep death Remington Walden, 4, burned to death when his family's Jeep Grand Cherokee was rear-ended.

3-26-2015 -- Marchionne insists fire-prone Jeeps are safe; consumer questions safety of supposed fix  The hitches being installed to prevent fires are not suitable for towing

11-21-2014 -- Jeep owners urged to get recalled vehicles fixed  Chrysler says it has plenty of repair parts available

11/17/2014 -- CEO ordered to testify in Jeep fire lawsuit  Older Jeep Grand Cherokee fuel tank fire controversy continues to smolder

5/13/2014 -- Slow-moving Jeep retrofit creeps along, as trailer hitch production gets underway  Trailer hitch assembly will supposedly protect gas tank in rear-end collisions

1-18-2014 -- Feds close inquiry into Jeep SUV fires, Chrysler agrees to a controversial "fix"  A last-minute phone call with a "retiring" regulator seems to have sealed the deal

1/9/2014 -- Ex-auto safety regulators settling into their new lobbying and advocacy jobs  LaHood and Strickland now see the "Dangerous Jeeps" issue only in their rear-view mirrors

6-18-2013 -- Chrysler agrees to inspect -- but not recall -- Jeep SUVs  Critics say the Jeeps are prone to deadly fires in rear-end collisions

6-4-2013 -- Chrysler refuses to recall Jeeps  Feds and consumers say the Jeeps are prone to fires in rear-end collisions

5-8-2013 -- Crusade to corral fire-prone Jeeps drags on  At least 270 people have burned to death in rear-end accidents involving Grand Cherokees

1-30-2013 -- Petition seeks federal action to stop Jeep fires  Woman starts petition drive after seeing two people burn to death in their Jeep

6-15-2012 270 Deaths Later, Feds Accelerate Probe of Jeep Fires  A consumer group spelled out the problem in great detail more than two years ago

1-31-2011 Nader Urges Fiat to Recall 1993-2004 Jeep Grand Cherokees  Calls the Jeep "a modern day Pinto for soccer moms" prone to burst into flames

The Obama Administration has finalized standards that would increase fuel economy to the equivalent of 54.5 mpg for cars and light-duty trucks by Model Year 2025. 

When combined with previous standards, this will nearly double the fuel efficiency of those vehicles compared with new vehicles currently on the road, according to the administration. Officials say the standards would improve fuel economy and reduce greenhouse gas emissions, saving consumers more than $1.7 trillion at the gas pump and reducing U.S. oil consumption by 12 billion barrels. 

“These fuel standards represent the single most important step we’ve ever taken to reduce our dependence on foreign oil,” said President Obama. “This historic agreement builds on the progress we’ve already made to save families money at the pump and cut our oil consumption. By the middle of the next decade our cars will get nearly 55 miles per gallon, almost double what they get today. It’ll strengthen our nation’s energy security, it’s good for middle class families and it will help create an economy built to last.” 

Reaction 

The Consumer Federation of America (CFA) threw its support behind the initiative. 

"This is not only a big win for consumers, it is vital to the U.S. auto industry and the single most important thing we can do to end America’s addiction to oil -- something President George W. Bush called “a serious problem" -- and to improve our national energy security," said Mark Cooper, director of research at CFA. "The many benefits of this policy are so clear that is has garnered widespread support from the public, automakers, auto workers, national security experts, public health advocates and environmentalists." 

The Auto Alliance, which represents the major automobile manufacturers, posted a statement on its Website reading, "The Auto Alliance has called for a single, national program because conflicting requirements from several regulatory bodies raise costs, ultimately taking money out of consumers' pockets and hurting sales. We all want to get more fuel-efficient autos on our roads, and a single, national program with a strong midterm review helps us get closer to that shared goal." 

The standards issued by the U.S. Department of Transportation (DOT) and the U.S. Environmental Protection Agency (EPA) build on the standards for cars and light trucks for Model Years 2011-2016. Those standards raised average fuel efficiency by 2016 to the equivalent of 35.5 mpg.

New technologies 

Major auto manufacturers are already developing advanced technologies that can significantly reduce fuel use and greenhouse gas emissions beyond the existing model year 2012-2016 standards, according to EPA. In addition, many technologies are currently available for automakers to meet the new standards, including advanced gasoline engines and transmissions, vehicle weight reduction, lower tire rolling resistance, improvements in aerodynamics, diesel engines, more efficient accessories, and improvements in air conditioning systems. 

The program also includes targeted incentives to encourage early adoption and introduction into the marketplace of advanced technologies to dramatically improve vehicle performance, including: 

• Incentives for electric vehicles, plug-in hybrid electric vehicles, and fuel cells vehicles; 
• Incentives for hybrid technologies for large pickups and for other technologies that achieve high fuel economy levels on large pickups; 
• Incentives for natural gas vehicles; 
• Credits for technologies with potential to achieve real-world greenhouse gas reductions and fuel economy improvements that are not captured by the standards test procedures.

Will higher mileage vehicles save consumers money or price them out of the new-car market?  That's the debate that's being heard as the Obama Administration pushes its 54.5-mpg-by-2025 standard.  Auto dealers and some manufacturers have been saying the standard will make cars so expensive consumers won't be able to afford them.

But now, the Consumer Federation of America (CFA) is fighting back, saying more efficient cars must be a top consumer protection priority and releasing what it calls the top ten reasons the new standard will save consumers money.

“What’s not to like?” said Mark Cooper, Director of Research for CFA, of the 54.5 mpg standard, which is expected to be adopted late this summer. “Better gas mileage means more money in Americans’ pockets. Last year household gasoline expenditures set a record, reaching an average of over $2,850. Consumers can’t stomach these prices and the new standards are the only way they’re going to get some relief.”

The National Automobile Dealers Association (NADA) says there's plenty not to  like. It released a study in April indicating that higher vehicle prices resulting from proposed fuel economy rules will cut millions of potential new-car buyers out of the market in 2025.

“To work, fuel economy improvements must be affordable,” said Don Chalmers, president of Don Chalmers Ford in Rio Rancho, N.M. “While you can mandate what automakers must build, you can’t dictate what customers will buy, nor can you dictate if a bank will make a loan.”

Who's right?

Here are CFA’s ten reasons why steadily raising fuel economy standards to 54.5 mpg by 2025 for passenger cars and trucks will benefit consumers and the nation:

(1) The standards lower the total cost of driving from the minute you drive off the lot. For the typical consumer who takes out a five-year auto loan, the monthly gas savings are greater than the increase in the monthly payment needed to buy a more fuel-efficient vehicle. Over the life of a vehicle covered by the new standards, the average buyer will bank a net savings of $3,000.

(2) The standards improve gradually over time, allowing the auto industry to build up their new, more fuel-efficient vehicles at a reasonable, steady pace. Car companies redesign their vehicles on a three-to-five-year schedule, so introducing new technologies can take time. Increasing efficiency over time makes the introduction of new technology achievable.

(3) Consumers will choose the vehicles they want. If they want a truck or an SUV, they’ll be able to buy them, but the vehicles will just be more efficient. Under the standards, different classes of vehicles are required to meet different standards. Standards are higher for compact cars and lower for SUVs and pick-up trucks. Automakers do not have to switch to selling only compact cars and sedans to meet the standards.

(4) Consumers can choose the technologies they want—they won’t be forced to buy into any one technology. Automakers will be able to meet the standards by improving gasoline-powered vehicles, or they can decide to delve into hybrids, electric vehicles, and other more advanced technologies. The standards do not favor any particular technology. Automakers will compete to deliver the best mix of vehicles across types and technologies. Consumers will have the full range of choices, and automakers will be able to offer the vehicles they think will sell best.

(5) Consumers will enjoy better, more fuel-efficient vehicles from ALL automakers. Under the standards, no single company can shirk the rules. If an automaker does not meet the standards, it will pay a fine. The major automakers support the standards because they know they can meet it—and they know that it is in their best interests to compete under a national standard that applies to all automakers.

(6) The standards will make the U.S. auto industry stronger. The rules are set at a level that puts the U.S. on par with the global auto market. In order to compete, automakers must spread the costs of product development across products that rely on a platform that meets global demand. Edging closer to international mileage standards for efficiency also makes American vehicles more competitive.

(7) Consumers value fuel-economy -- it's a worthwhile improvement in quality. It’s expected that the new standards will increase auto prices by about $300 per year over the next 15 years. That is less than the increases the automakers have imposed on the public by voluntary increases in quality over the past 15 years and today.  Better fuel economy is priority #1 for enhancing quality.

(8) Consumers will be able to finance fuel-efficient vehicles. With gasoline now being the highest cost of driving - higher than most Americans’ monthly car payment - some banks have begun to recognize that more fuel-efficient vehicles are more affordable, and are factoring that into their lending decisions.

(9) Lower income households will not be hurt by the new standards. Critics who want to keep consumers tethered to the expensive gasoline pump claim that the small increase in upfront cost could hypothetically render very low income-households ineligible for new car loans. This argument is a red herring. Consumer data shows that lower-income households are very unlikely to be in the new car market. These individuals are much more likely to buy used vehicles.

(10) In fact, lower income Americans are likely to benefit from the standards.  Low-income families buy used cars. The standards will accelerate fleet turnover, increasing the supply of used cars.

“These ten reasons why the new fuel economy standards are good for consumers also show why they are good for the nation and enjoy the support of not only consumers, but automakers, labor unions, national security experts and environmentalists,” Cooper concluded.

NADA thinks not

The auto dealers say the proposed rules, combined with the Obama administration’s previous fuel economy mandates, will raise the average price of passenger cars and light trucks for the 2025 model year by nearly $3,000, according to estimates by the Environmental Protection Agency and National Highway Traffic Safety Administration. CFA, as noted above, estimates the increase at $300 per year over the next 15 years, for a total of $4,500.  

The NADA study claims that nearly 7 million lower-income consumers, such as college students and working families, will not qualify for auto financing to cover the additional cost.

“Loan qualification is based mainly on the customer’s income, existing debt and the vehicle’s price,” Chalmers said. “The resulting calculation is simple: fewer car shoppers will qualify for auto financing with higher vehicle costs.” 

The study is based on an evaluation of a consumer expenditures report from the U.S. Bureau of Labor Statistics. NADA analyzed the financial profiles and purchasing behavior of a large sample of U. S. consumers to calculate debt-to-income ratio for households.

“The unintended consequences of the proposed fuel economy increases are clear,” said David Wagner, the primary author of the study and an analyst with the NADA Used Car Guide. “If the price of a vehicle goes up by the government estimate of almost $3,000, millions of people will no longer be able to finance a new vehicle.”   

Doug Greenhaus, NADA’s chief regulatory counsel for environment, health and safety, says the government needs to better understand the impact of the proposed fuel economy rules on consumers and auto lending before doubling down on new mandates.

“Disregarding vehicle affordability will undermine the environmental and national security benefits the administration is seeking,” Greenhaus said. “The proposed MY 2017-2025 fuel economy rules should be delayed until there is a more accurate picture of how prospective buyers likely will react.”

The Obama Administration today unveiled a proposed rule that would require automakers to double the average fuel economy of their vehicles to 54.5 miles per gallon by 2025, estimating that the change would add $2,000 to the average price of a car.

The proposal brought howls of protest from automakers who warned the changes would price millions of Americans out of the new-car market, keeping older, less fuel-efficient cars on the road longer. The Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) estimated the changes would cost $157 billion while returning benefits of up to $515 billion. 

In a joint statement, the EPA and NHTSA said the Obama Administration is acting “to strengthen the economy and move the country forward because we can't wait for Congressional Republicans to act.”

Big costs, bigger savings?

The agencies said that, combined with other steps the Administration has taken to increase energy efficiency, the proposal will save Americans over $1.7 trillion at the pump, more than $8,000 per vehicle by 2025.

“These combined actions also will reduce America's dependence on oil by an estimated 12 billion barrels, and, by 2025, reduce oil consumption by 2.2 million barrels per day – enough to offset almost a quarter of the current level of our foreign oil imports. Taken together, these actions will also slash 6 billion metric tons in greenhouse gas emissions over the life of the programs,” the statement continued.

Representative Ed Markey, a Massachusetts Democrat, and 107 other U.S. House members yesterday sent a letter to Obama supporting the rule.

"We believe that these standards to reduce petroleum use in cars and light trucks represent an opportunity to increase our national and economic security in an unprecedented way by dramatically decreasing our dependence on foreign sources of petroleum," they wrote.

Representative Darrell Issa, a California Republican, opened an investigation into how it was written, saying it was rushed and may jeopardize safety by reducing the weight of vehicles on the road.

A proposed rule had been due Sept. 30 before regulators said they needed more time. The final rule is scheduled to be published next year.

"Steady improvements"

"By setting a course for steady improvements in fuel economy over the long term, the Obama administration is ensuring that American car buyers have their choice of the most efficient vehicles ever produced in our country. That will save them money, reduce our nation's oil consumption and cut harmful emissions in the air we breathe," said EPA Administrator Lisa P. Jackson. "This is an important addition to the landmark clean cars program that President Obama initiated to establish fuel economy standards more than two years ago.”

The Obama Administration had earlier reached agreement with Ford, Honda, Toyota and General Motors to achieve annual fuel-economy increases of 5 percent for cars. Volkswagen and Daimler AG were among automakers that didn't sign on to that agreement.

Dealers object

Today's proposal landed with a thud at the offices of the National Automobile Dealers Association.

"America's auto dealers support continuous improvement in the fuel economy of the fleet of vehicles that drive on the nation's roads," the association said in a statement. "To this end, we are concerned that adding about $3,000 to the average cost of a car will price millions of Americans out of the market, which could reduce fleet turnover and delay environmental gains."

EPA and NHTSA insisted the new standards will “rely on innovative technologies that are expected to spur economic growth and create high-quality jobs across the country.”

“The standards should also spur manufacturers to increasingly explore electric technologies such as start/stop, hybrids, plug-in hybrids, and electric vehicles. The MY 2017-2025 proposal includes a number of incentive programs to encourage early adoption and introduction of 'game changing' advanced technologies, such as hybridization for pickup trucks.