- Jul 29, 2011
Obama's CAFE Plan Good For Everyone, Except Car Buyers
The President unveiled a plan to hit 54.4 mpg by 2025, an aggressive goal that will raise car prices
Top executives from General Motors, Ford, Chrysler, Toyota, Honda, BMW, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan and Volvo were on stage with the President when he made the announcement. Those companies make up 90% of U.S. car sales volume annually.
"This agreement on fuel standards represents the single most important step we've ever taken as a nation to reduce our dependence on foreign oil," Obama said. "Most of the companies here today were part of an agreement we reached two years ago to raise the fuel efficiency of their cars over the next five years. We've set an aggressive target and the companies are stepping up to the plate."
Officials from the state of California and from the United Auto Workers union were also on stage, showing the government had garnered support from the one state that has pushed fuel economy standards farther than any other U.S. power, and labor unions.
But consumers – who could end up spending $2,100 more per car to pay for the added fuel-saving technologies – weren't on hand. And it's unclear whether most people will be motivated to spend more to save gas, when the price of gas is still low compared with fuel costs around the world.
"While it seems that there is something in the proposal for each of the big, organized constituencies – environmentalists, domestic car companies, union labor – one group has been largely ignored – the American consumer," says Jack Nerad, executive editorial director and executive market analyst at Kelley Blue Book."We have a hard time believing that the typical new-car customer will be happy about spending $2,000 more for his or her new car than they otherwise would."
The administration won't say how much extra vehicles will cost when the new rules go into effect. But a research report written while the government was studying the proposal said the cost could be around $2,100 per car. Administration officials talking on background Friday said they didn't want to say how much the standards will actually cost until they study the issue more.
See: AOL Autos Op-Ed: What Obama's New 54.5 MPG Standard Means For Our Rides.
But cost is a big issue: Customers often say they are in favor of higher fuel efficiency, but when it comes time to pay for it, many balk. A survey by LeaseTrader.com found 72% of the 1,100 people they talked to said they wanted more fuel-efficient cars.
But when they were told those efficiencies came with a $2,000 price tag, only 34.5% stayed in favor of increasing fuel economy mandates.
Pickup trucks won't face the same regulations as passenger cars, which could prompt automakers to start making many more pickup-truck like vehicles. Are we facing a future of Chevy El Caminos?
The mandate is still 13 years away from taking effect, and there is a provision to revisit the mandate in a few years if it doesn't seem to be working out. So it may be one of those things, like President Bush's 2004 mandate to send humans to Mars, that may never materialize.
Bottom line: While higher fuel efficiency standards sound good on paper, pushing it too hard, too soon could end up backfiring on consumers.