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James Bryant

Will Federal Regulators Move the Fuel Economy Goalpost?

by James Bryant | Dun & Bradstreet Editor

June 10, 2016 | No Comments »

This month, regulators will check the dipstick on a 2012 ruling that outlined light-duty-vehicle fuel economy goals for 2025. The current goal aims for carmaker fleets to reach an average fuel economy of 54.5 mpg by the 2025 model year — double the average mileage in 2008. In real-world terms, the 2025 goals would mean an average of 40 mpg on the window sticker.

The upcoming Draft Technical Assessment Report (TAR) by the EPA, the National Highway Traffic Safety Administration (NHTSA), and the California Air Resources Board (CARB) has been two years in the making and cost $25 million to produce. The TAR is expected to assess a range of issues relating to the 2025 goal, including automaker progress, technological improvements, consumer sentiments, and oil prices. The TAR is a report rather than a final ruling and will be followed by a public comment period in mid-2017. The final determination is scheduled for April 2018.

Industry watchers are betting regulators are unlikely to veer far from the goals set out in 2012, as reducing carbon emissions and stemming the tide of climate change is a defining issue for the Obama administration. On the other side, the auto industry thinks the rules should be softened amid low oil prices and lackluster electric and hybrid car sales. Alternative-fuel vehicle sales peaked in 2013 when they reached 3.8% of US market share. Since that time, oil prices have fallen 50% and electric and hybrid market share dropped to 2.9%. With low gas prices, US drivers can’t justify the higher sticker price of an electric or hybrid vehicle.

The lack of carmaker enthusiasm for the 2025 goals isn’t due to a dearth of strategies for making their vehicles more efficient. The bag of tricks includes lightweighting, smaller engines, and electrification. The problem for carmakers is combining bits of the available technology options and picking the best approach for current and future market conditions. Weighed against that is the added cost for drivers who already seem unwilling to pay higher prices for more-efficient cars. While average fuel economy has risen about five mpg over the last eight years, it has flattened over the last two years as oil prices dropped, according to a study by the University of Michigan Transportation Research Institute.

Major car companies are reportedly lobbying congress to forward the notion that customers need to actually buy the more efficient cars that are built. They contend public policy needs to take real-world behaviors into account. However, the emissions scandal at Volkswagen intensified regulatory scrutiny of emissions-related issues, and is likely to make regulators more skeptical of the industry’s arguments.

In the end, the final regulatory determination may come in November when voters head to the polls to elect a new president. Whoever is elected is likely to name a new administrator of the EPA, who will make the decision in April 2018.

James Bryant is an industry editor for Dun & Bradstreet. Based in Austin, Texas, he writes about issues affecting the global manufacturing sector. He’s been the company’s specialist on the auto industry for 15 years.


Photo by Patrick Emerson, used here under a Creative Commons license.

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