What the New CAFE Standards Mean for Auto Buyers

White House Infographic, fuel economy standards

There has been a lot of news this week regarding the Environmental Protection Agency and National Highway Transportation Safety Administration issuing new Corporate Average Fuel Economy (CAFE) standards. The reports seem to suggest the government has gone lax on the issue of fuel economy because most Americans don’t seem to care about it.

One analyst, however, suggests the opposite may be true. Stephanie Brinley, a senior analyst at IHS Automotive, read the entire 1217-page midterm report that discussed the standards (something probably 99 percent of journalists didn’t do, including me).

She wrote in Forbes, “The (CAFE) standard and NHTSA projected figures for the 2025 model year targets, however, have now been revealed as a projection rather than a legal requirement. The report is supportive of the progress and direction of the existing standards. The agencies believe automakers can meet the challenge, and that consumers want it.”

As Brinley explains, the numbers are fluid based on what consumers are buying. She said figures put together by IHS Automotive show the current mix of vehicles to be 60 percent trucks (including SUVs, pickups, and minivans) and 40 percent cars.

But what does this mean for auto buyers?

The immediate impact will most likely be felt by small-car buyers, as there is now less incentive for auto manufactures to make more fuel-efficient vehicles. The automakers can point to the fact that Americans want more trucks and fewer cars.

You might disagree, citing new fines announced this week that have automakers paying $14 per one-tenth of a mile per gallon over the fleet target, up from $5.50. But there’s a funny thing about fines. Manufacturers don’t really pay them. Sure, they’re hit with the fines, but consumers end up paying these fines as part of the sticker price.

This fine is one people are willing to pay, especially if it means owning a more distinctive vehicle. Such vehicles tend to lend an appearance of power, as well as a wallet deep enough to take the hit.

Something else worth noting is that a 54.5 mpg fuel-economy number has never meant what most consumers assume. It’s actually based on a number dating back to the 1970s and is more like 42 mpg; lots of corporate fleets are nearing this benchmark.

How does that seem possible? Obvious answers include electric vehicles like the Chevrolet Volt and plug-in hybrids like the Toyota Prius. Diesels also play a big role in vehicles like the Ram 1500.

What’s interesting is to see this move taking place at the end of a presidential administration. It seems like the kind of thing that might best be left to a new president – unless, of course, the current administration wants to be seen trying to pump up (no pun intended) the domestic oil business with lower fuel prices.

Regardless, this all means nothing and/or everything could change by 2025. It just depends on who’ll be running Congress at that time.

– Keith Griffin

Do you think fuel-economy numbers will change significantly any time soon?

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