Fuel Standards

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