The ultra-high fuel economy standard of 60 mpg -- once on track to take effect by 2025 -- is up in the air after Republican successes in Congress. Until a few weeks ago, federal regulators were racing to implement the 60-mpg goal with a speed that would impress the most skilled engine builders in Detroit, Stuttgart or Toyota City. But while its defenders still give the new standard good odds, auto companies are in a better position than ever to slow its advance and soften its terms, industry representatives say.
Even now, the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) are moving more slowly than they were at mid-year, said Doug Greenhaus, director for the environment, health and safety at the National Automobile Dealers Association (NADA). "They have read the tea leaves in Washington," he says.
Special interest groups and automakers will focus on Fred Upton, the Michigan Republican, who takes over as chairman of the House Energy and Commerce Committee in January. The moderate Republican has publicly promised to provide tough oversight of federal regulators. He certainly will have the opportunity to do that and more, if he is inclined to demonstrate his anti-regulatory credentials by blocking aggressive fuel standards. One of his predecessors, Rep. John Dingell, the long-serving Michigan Democrat, took pride in holding off increases in fuel economy standards for years, a position viewed as a defense of the auto industry.
To legislative specialists like Brendan Bell of the Union of Concerned Scientists (UCS), Upton's statements may be just "political posturing." But to organizations like the Alliance of Automobile Manufacturers, a trade group representing about a dozen U.S. and foreign automakers, they signal a shift in the political landscape.
The Alliance has said it will review the technical assumptions behind the 60 mpg target over the next few weeks -- including the costs of the new technologies. In the meantime, no one seems to doubt that the auto industry can build fleets of vehicles averaging 60 mpg. The questions are whether they will be affordable and whether consumers will buy them.
Merely A Nuisance
The CAFE standards were never much more than an inconvenience in the past. Over more than three decades, the government has used CAFE to guide automakers to reduce the fuel consumption of our national fleet. Companies faced fines when the average for their total production in a given year failed to reach the target.
The figure for passenger cars started out at 18 mpg in 1970s and rose at glacial pace to just 27 mpg in the early 2000s -- thanks in no small measure to gatekeeper Dingell and other members of the Michigan Congressional delegation.
Even at relatively low levels, CAFE standards produced distortions, critics charge. For years, automakers sold compact cars at or below their costs primarily to lower their corporate averages -- and, from all appearances, they stopped thinking about small cars as potentially profitable products.
Strangely enough, the CAFE targets favored SUVs -- to the point that they are credited with helping to create the market for the segment. SUVS were permitted to have higher averages than passenger cars since they were considered trucks. So automakers built and sold them with abandon.
Research And Get No Hassle Pricing On Fuel Efficient Vehicles
Rising Fuel Economy
Somehow -- thanks to the CAFE standards or despite them -- the general fuel efficiency of U.S. vehicles has managed to steadily rise. The difference now is that the targets have been ramped up dramatically. The agencies want automakers to cut their vehicles' fuel use by as much as 6 percent annually from 2017 to 2025. That works out to 60 mpg, according to UCS. The new targets for that period are due to be finalized in 2012.
Greenhaus notes that automakers have already bought into a less-stringent 35.5-mpg standard for 2016, even though it is considered aggressive. But the carmakers aren't at all receptive to a 60-mpg standard that the EPA and NHTSA have proposed, he said.
"It is one thing to get one or two vehicles in the corporate fleet up to 60 mpg," Greenhaus said. "But it's another matter to get the average fuel economy from a GM or an even a more challenged manufacturer like BMW."
Even Hyundai, one of the fuel economy leaders, would likely have problems with the standard, given its plans in the premium segment, he said.
If consumers don't embrace the new vehicles, Greenhaus said, many thousands will end up sitting on dealerships lots, doing nothing to reduce consumers' gasoline bills or the national dependence on foreign oil.
The Coming Battle
That argument doesn't faze the small army of environmental and other groups lined up behind the 60 mpg standard. Many are armed with studies by the Massachusetts Institute of Technology and other institutions showing that dramatically higher fuel efficiency is feasible. And even in the new political environment, they say the higher standards will survive Congressional scrutiny.
"It's something hard to argue against," Bell said. "It's making the country more energy efficient and saving people money at the gas pump."
One of the auto industry's problems is that hasn't formed a common front with the GOP on the 60 mpg target, leaving them without a champion, Bell said.
In contrast, the higher CAFE targets have enjoyed support from both sides of the aisle. It was no accident that Daniel Inouye, a Hawaii Democrat, and Ted Stevens, the late Alaska Republican, co-sponsored new CAFE legislation in the Senate in 2007.
In any case, neither party is in a position to have its way on the issue, said Mark Cooper, director of research for the Consumer Federation of America. In 2011, the Senate will be in the Democratic hands and the House in Republican hands. As a result, the EPA and NHTSA appear to be in the driver's seat. "With divided government, you are more likely to get executive action than you are less likely," Cooper said. "There will obviously be efforts by industry to slow it down. But there doesn't appear to be any impediment to a more aggressive standard – either legislatively or legally."
The automakers aren't so sure. Greenhaus expects the battle to be joined shortly. Federal officials will be called to testify about the new standards, he said, and auto industry will step up efforts to educate Congress and the public."Automakers have been quiet until now. Watch what happens over the next few months," he said. "I think you will see automotive manufacturers acting much more aggressively than they have been."