The deed is done: the “2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards” have been entered into the Federal Register and “54.5 mpg” is the new buzzword in the industry, media and blogosphere.
Chrysler/Fiat CEO Sergio Marchionne said the new standards “will change the way the industry operates” and that they may mean that muscle cars like Dodge Chargers and Challengers with big HEMI V8 engines will become as “rare as white flies.”
Representative Darrell Issa, R-California, chairman of the House Oversight and Government Reform Committee, said “The rule finalized today by the Obama Administration will hurt American consumers by forcing them to drive more expensive and less safe automobiles. I support the goal of higher fuel efficiency, but this rule will only add to the burdens American small businesses and middle class families face under the heavy hand of the Obama Administration.”
GOP Presidential candidate Mitt Romney says the new rules will add $10,000 to the price of a new car, while Boston Consulting sees an increase of $2,000 to $3,000. The government thinks the number will be about $2,800 and says the cost will be more than recouped by the savings on fuel.
What the EPA and NHTSA have actually said can be summed up by the following: “EPA is establishing standards that are projected to require, on an average industry fleet-wide basis, 163 grams/mile of carbon dioxide (CO2) in model year 2025, which is equivalent to 54.5 mpg if this level were achieved solely through improvements in fuel efficiency.
“Consistent with its statutory authority, NHTSA has developed two phases of passenger car and light truck standards in this rulemaking action. The first phase, from MYs 2017-2021, includes final standards that are projected to require, on an average industry fleet wide basis, a range from 40.3 – 41.0 mpg in MY 2021. The second phase of the CAFE program, from MYs 2022-2025, includes standards that are not final, due to the statutory requirement that NHTSA set average fuel economy standards not more than 5 model years at a time. Rather, those standards are augural, meaning that they represent NHTSA’s current best estimate, based on the information available to the agency today, of what levels of stringency might be maximum feasible in those model years. NHTSA projects that those standards could require, on an average industry fleet-wide basis, a range from 48.7 – 49.7 mpg in model year 2025. (Environmental Protection Agency and National Highway Traffic Safety Administration, “2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards,” page 11 of 1230)
The new standards are the biggest jump in Corporate Average Fuel Economy (CAFE) since the program began in 1975 and they involve numbers that look difficult and expensive to achieve. Indeed, the EPA estimates compliance will cost the auto industry $136 billion over the implementation period.
However, “the heavy hand of the Obama Administration” may not be so heavy after all and the world of 2025 probably won’t be populated with tiny people-movers like GM’s EN-V traveling on electric highways. With a closer look at the CAFE process, it turns out there might even be a few muscle cars.
The 54.5 miles per gallon figure sounds big until one sees where the industry already is. The chart below contains the latest information from the U.S. Department of Transportation’s “Summary of Fuel Economy Performance” released in March of this year. There are three different CAFE standards: Domestic Car, Import Car and Light Truck. “Standard” refers to the sales-weighted fuel economy standard established by the federal government. “Average” is the actual CAFE for that class. These figures were based on manufacturer’s pre-production estimates but final figures from 2010 (the most recent year for which they are available) show much the same story.
|2012 PRELIMINARY FUEL EFFICIENCY RESULTS|
|Jaguar Land Rover||Import Car||30.0||23.6||-21.33%|
|Jaguar Land Rover||Light Truck||27.1||20.4||-24.72%|
|Tesla (electric)||Domestic Car||112.5||112.5||0.00%|
|Think (electric)||Domestic Car||130.6||130.6||0.00%|
|Wheego (electric)||Domestic Car||33.3||106.6||220.12%|
|*Fiat’s score includes figures from Ferrari and Maserati|
The CAFE figures are not derived from the EPA numbers found on the window stickers of new cars; it’s a whole different kind of math. It’s being simplified somewhat with the new “footprint” (wheelbase times track) metric, but it still produces a different set of values. By way of comparison, the average window sticker fuel economy for light vehicles sold in January of this year was 23.1 miles per gallon. That’s a new record but it’s well below the CAFE numbers.
Using very rough values, the sales-weighted average city rating for Chrysler’s 2011 passenger cars works out to 18.8 mpg; the average highway rating is 27.5 mpg. Using the 55%/45% mix of the city and highway numbers used for calculating CAFE numbers, the average is 22.7 mpg. Chrysler’s preliminary CAFE rating for the 2011 model year is 29.9 miles per gallon, beating the automaker’s 28.6 mpg standard with room to spare.
Furthermore, the new standards assume hybrids, plug-in hybrids, pure electrics and natural-gas-powered vehicles will become a larger part of the sales mix and there are values for them to be included in the CAFE calculus.
The NHTSA and EPA also expect gains to come from improvements in areas such as air-conditioning and recapture of refrigerant that have no relation to the drivetrain at all. That’s because the new standards are driven in large part by the need to cut greenhouse gas emissions, especially carbon dioxide. The most straightforward way to reduce those emissions is simply by burning less fuel, so everything is in play, including parasitic systems, like A/C and power steering, that reduce engine efficiency.
One very important thing about the new standards is that they are to be reviewed in 2017 to see if the target for 2025 is still realistic: that 54.5 mpg is not set in stone. Should the technology to bringing alternative fuel sources to market in a cost-competitive vehicle still be elusive, the government and auto industry can reset the CAFE to a number that is feasible.
In short, as Jim Hall of 2953 Analytics said, there may be comparatively little change. There are engines in production today with the potential to meet the 2025 standards. Add to that the expected advancements in battery and fuel cell technology and broader sales base for more practical and affordable electric and plug-in vehicles and manufacturers could find there is still room for those hot V8s.