Everything the Obama administration does these days is controversial, and yet most of the media (and the auto industry) have hailed the new CAFE (corporate average fuel economy) standards, signed last Friday.
They raise the targets for cars to 54.5 mpg by 2025 (from the current 35.5 mpg standard), and most environmentalists cheered.
The auto industry majors, with the exception of Volkswagen, have endorsed the new regs and in fact helped create them.
They got two important concessions from the administration: Light trucks and SUVs get a lower standard (3.5 percent improvement per year vs. 5 percent for cars), and the regs will get a “mid-course review to see if targets during the latter part of the nine-year period have to be adjusted in light of manufacturer costs, technology and sales.”
We know how important trucks are for the industry. And, as the debt deal just showed, the administration is adept at providing escape hatches.
But on balance, the cheerleaders tell us, there may be as much as a $1.7 trillion cost savings for consumers down the road—even though the vehicles will cost more. How much more, of course, we don’t know.
A whole bunch of credits and incentives is expected to benefit electrics, and the EPA has yet to set specifics for how the fleet averages will be calculated. There is nothing in the regs to encourage clean diesels. So a lot of questions remain.
I have never liked CAFE standards for two big reasons. First, the government basically tells the industry how to build its cars to a certain standard, and the rules it sets are complex, sometimes with unforeseen consequences.
Far better would be a much higher gas tax that would “force manufacturers to make fuel efficient cars to keep up with the market demand and would create a more natural mpg floor.”
Second, CAFE sets a fleet average and permits automakers to shift mpg averages from one category to another. Even so, will the small number of $40,000 Volt sales be able to offset low-mpg cars like the Malibu and Corvette? How many Leafs will it take to balance the Altima’s sales? Will U.S. muscle cars be on the way out with the new regs?
These are just some of the questions raised in an interesting post that I recommend.
Are the new CAFE regs going to benefit the consumer in the next 14 years? Give us your opinion.