CAFE:

Auto Industry is Ahead of Fuel Economy Technology

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The Midterm Evaluation of Corporate Average Fuel Economy (CAFE) Standards report issued in July 2016 by the Environmental Protection Agency(EPA), National Highway Traffic Safety Administration (NHTSA) and the California Air Resources Board (CARB) set the stage for comments on 2022-2025 CAFE standards.  The comment period ends on September 30, 2016 and some congressional leaders have asked for a further 60 day extension to receive comment.  Reading the details of the report is very enlightening and has largely been overlooked by the media.

Fuel Economy to Double from 2012 to 2025  In the rules established in 2012, fuel economy is to double by 2025 and green house gas emissions are to be cut in half.  This would save 12 billion barrels of oil over the lifetime of 2012-2025 model year cars and light trucks and save consumers billions of dollars in fuel costs.

Report Under-Estimates Truck Percentage of Light Vehicle Market  At the time the initial rules were set, the truck mix was assumed to be 33% of the light vehicle fleet.  Given today’s low gas prices and the popularity of crossover SUVs, the light truck mix is over 60% of the market today and is projected to grow to over two thirds of the market by 2020.  In the Midterm Evaluation the government agencies show the highest truck mix to be 52% with low fuel prices continuing.  If fuel prices return to peak levels seen during the last decade (not projected), the light truck mix is assumed to be 38%.  Given the reality of the market, both of these estimates are conservative and very low.

Automakers Ahead of Schedule in Meeting Future CAFE Requirements  To date, the Midterm Evaluation concludes “auto manufacturers have over-complied with the program”.  This is a surprising statement from agencies that often accuse the industry with foot dragging in fuel efficiency and safety technologies.  They note that “fuel economy technologies are entering the market at rapid rates” and that the costs of adding these technologies have not been as high as estimated back in 2012.

Consumers Have Accepted Enhanced Powertrains  The report also notes that consumer acceptance of advanced fuel efficiency technology has largely been positive.  Ford’s EcoBoost turbocharged powertrain technologies have been well accepted (and strongly advertised).  Stop/Start technology is becoming more accepted according to AutoPacific’s consumer research.  Stop/Start shuts the engine off when stopped and then restarts the engine immediately when the accelerator is applied.  Some Stop/Start systems are seamless.  Others are rough on start-up. As the systems improve acceptance will improve.

Enhanced Gasoline Powertrains Can Meet 2025 CAFE Standards  To meet 2025 CAFE requirements, the agencies identify several technologies that will play an important part.  Most are enhancements to gasoline powertrains.  Tops on the list are transmissions with 8-speeds or more (70%) .  General Motors and Ford are working together to develop multi-speed transmissions.  More engines will be turbocharged (54%).  Stop/Start will become more commonplace (38%).  The most interesting fact is the report assumes less than 2% of the vehicle fleet will be full electric vehicles and less than 1% will be a plug-in hybrid.  Mild hybrids are estimated to be 14% and full hybrids will be 14% to meet 2025 CAFE.  There is only passing mention of fuel cell vehicles.

Substantial Cost Increases to Meet Future CAFE Standards  Improving fuel economy is not free.  Back in 2012, cost increases of over $3,000 per vehicle were estimated to meet 2025 standards. The cost is now estimated by the agencies to be around $1,250 (over a 2021MY vehicle).  Nowhere in the report does it mention how much the cost to get from 2012 to 2021 is.  The report estimates that meeting the 2022 to 2025 standards will increase lifetime vehicle costs by $87 billion.  This is estimated to be offset by fuel savings of $120 billion and other benefits of $55 billion.  The net benefit is estimated to be $88 billion.  Like many government reports, the arithmetic is vague and the conclusions are shaky.

AutoPacific’s bi-monthly Fuel Price Impact Study shows that consumers are not particularly willing to spend more for a vehicle that is more environmentally friendly.  Consumers also say that their present vehicle is clean enough and the focus should be on cleaning up other sources of pollution.  The Midterm Evaluation does not mention that there has been any research conducted to determine consumers’ willingness to pay substantially more for higher fuel economy vehicles.

Plug-In Electric Vehicles Not Needed to Meet Federal CAFE  Perhaps the most interesting conclusion in the report is that plug-in electric vehicles are not needed to meet the Federal 2025 CAFE standards.  This is not welcome news to Tesla’s Elon Musk or Nissan’s Carlos Ghosn.  The primary reason electric vehicles (EVs) and plug-in hybrid vehicles (PHEVs) will impact the overall vehicle fleet are to satisfy California’s mandate for zero emission vehicles (ZEVs) in the fleet.  California’s regulations also are shared with northeastern states.

Even Tougher Standards in the Future?  The report is very complimentary of the auto industry’s progress in adopting enhanced technologies to meet future fuel economy requirements.  While some might hope that this would lead to a reduction in future standards, it might result in even tougher fuel economy goals.


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Save Detroit – Scrap CAFE

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This very insightful opinion piece appeared in September 10, 2008 issue of the Wall Street Journal. Written by Holman W. Jenkins, Jr. the article confirms the position of AutoPacific and VehicleVoice that CAFE is unnecessary and costs the industry and the taxpayer far more than it achieves.
How to Save Detroit… And $50 Billion
by Holman W. Jenkins, Jr.
September 10, 2008
For a sum small compared to their revenues but large in relation to their market caps, the Detroit auto makers were all over the two conventions. Their lobbyists had something to sell — a plea for $50 billion in federal loans. Congress practically owes us this money, Ford, GM and Chrysler argue — because Congress slammed us with new fuel mileage mandates that will cost us $100 billion to meet.


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What a Relief – Chrysler Imperial Cancelled

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As the auto industry reviews its future under what certainly will be tougher Corporate Average Fuel Economy standards, cycle plans at each company are being scrutinized. What is happening is that some vehicles are being deferred as studies are carried out to determine if their fuel efficiency can be improved. Those that will definitely damage CAFE are being put on the chopping block if acceptable offsets cannot be found. On July 17, 2007 Chrysler Group announced that the Chrysler Imperial is being scrapped.

Chrysler_Imperial_F34.jpg

Thank Heavens The Emperor is Dead
This is one of the few benefits that can be expected from the more stringent CAFE standards. The Imperial, first seen during the 2006 Auto Show season has to be one of the most contrived, unattractive concepts shown in years. It goes into the “what were they thinking” category and we wondered if it was just a cruel joke.
Based on the Chrysler rear wheel drive platform the Imperial would have been assembled at Chrysler’s Brampton Assembly Plant along with the Chrysler 300, Dodge Magnum and Dodge Charger. Chrysler states that the Brampton change-over for the 300/Magnum/Charger would continue moving forward just without the Imperial.
With Different Styling, Imperial Could Have Been a Reasonable Line Extention
Our complaint with Imperial is that it is ugly. It is an example of Chrysler styling having run amok following the “merger of equals” with Daimler-Benz. These are the same folks, you know, that have given us the ungainly Jeep Commander. The best styling coming out of Chrysler since the “acquisition” have been the Chrysler 300 and Dodge Magnum. Neither the Charger or the Imperial shared the same spark. We hope that with Tom Gale – Chrysler’s former design boss – joining Cerberus as an advisor, that Chrysler can find its design mojo once again.


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