Speed Bumps on the Road to 54.5 MPG
Automakers and regulators continue to spar over the viability, cost and timing of the proposed changes to U.S. corporate average fuel economy (CAFE) standards that stand to push requirements to 54.5 mpg by 2025. While both sides agree that substantial progress has been made in recent years to improve fuel efficiency, there’s considerably less harmony regarding the future. The differences were readily apparent in two recent reports—one from each side—and opposing speakers at the annual Management Briefing Seminars (MBS) held in early August in Traverse City, Michigan.
The mid-term Technical Assessment Report (TAR) released in July by the Environmental Protection Agency, National Highway Safety Administration and California Air Resources Board paints a rosy, green-tinted picture. Pointing out that automakers have exceeded fuel efficiency targets in recent years by adopting advanced engine and transmission technologies faster and more cost effectively than originally forecasted, the authors conclude that the auto industry can continue to make the necessary incremental improvements to achieve the 2025 bogeys—and do so mainly by tweaking good old internal combustion engines rather than shifting demand to hybrid and pure-electric vehicles.
A separate report issued in June by the Alliance of Automobile Manufacturers (AAM), which represents 12 domestic and foreign-based automakers, isn’t so cheery. The group acknowledges that its members have generally outpaced CAFE requirements, but they claim it will be extremely challenging to continue to do so over the next years. The AAM report points out that none of today’s gasoline- or diesel-powered vehicles meet the 54.5 mpg standard and, it asserts, improving them to that level “goes beyond current technological realities.” As a result, the alliance reasons, that achieving 2025 standards without a huge upswing in EVs and hybrids “is not realistic.”
Both reports note that fuel prices play a big role in the type of vehicles people buy. When the new CAFE targets were set five years ago, the assumption was that cars would grow from 51 percent of new vehicle sales in 2012 to about two-thirds of the market in 2025. However, a 40 percent dip in pump prices has caused the ratio to shift the other way, with light trucks (pickups, vans and crossover/SUVs) accounting for 56 percent of sales last year and rising to 58 percent through the first half of 2016, according to Autodata Corp. If the trend holds, 2025 CAFE levels likely will be 50-53 mpg instead of 54.5 mpg, according to the latest TAR analysis.
Another point of contention is the so-called One National Program that was launched in 2009 to harmonize federal and state fuel economy and emissions standards to avoid conflicting regulations from multiple sources. But, AAM argues, this can’t be done if California and other states are allowed to have separate ZEV (zero-emission vehicle) rules under which 15 percent of an automaker’s sales would have to come from fully electric or fuel cell vehicles by 2025.
While the number of different hybrids and EVs available has soared in recent years, their combined sales account for less than three percent of the industry. AAM doesn’t expect much if any change in coming years. Speaking at an MBS session entitled “Fuel Economy and the Consumer,” AAM CEO Mitch Bainwol said 70 percent of hybrid and EV owners revert back to a conventionally powered vehicle when it’s time for their next purchase due to cost premiums for the technology, lack of a recharging infrastructure and general apathy about the importance of fuel economy.
Not surprisingly, Tesla has a different take on the situation. During the MBS panel discussion, Diarmuid O’Connell, the company’s vice president-business development, advocated for more EVs while blaming the sales dearth on the vanilla styling and underwhelming performance of rival EVs along with a lack of marketing support for them. He likened the excitement level of several competitors’ offerings to that of kitchen appliances.
But the time for such rhetoric is waning. With the 2022-2025 regulations due to be finalized by April 2018, talk is starting to turn to what’s next. And you can be sure that even more aggressive emissions reductions will be on tap for 2050.
With more than 25 years of experience, Steve Plumb has covered every aspect of the auto industry as an industry writer, editor and marketing professional. He was the founding editor of AutoTech Daily and rejoined the AutoBeat team in 2015. He previously was the editorial director for a leading public relations company.