Effects of Fuel Economy Mandates Focus of New CAR Reports

ANN ARBOR, Mich., September 21, 2016 —The Center for Automotive Research (CAR) today is releasing three reports on the potential effects of the U.S. fuel economy mandates.  CAR’s reports consider the potential economic effects along with providing insight into the pathways, effectiveness and associated costs for lightweighting and powertrain technologies.

CAR’s newest economic report, The Potential Effects of the 2017-2025 EPA/NHTSA GHG/Fuel Economy Mandates on the U.S. Economy defines nine fuel price and technology cost estimate scenarios, eight of which suggest the potential for significant job loss, with the most extreme scenario showing a loss up to as many as 1.13 million jobs in the United States.

“An important conclusion from this study is the overwhelming and direct importance of fuel prices in determining the economic effects of the fuel economy mandates for 2025, and the influence of fuel prices on the demand for fuel efficient vehicles,” said Dr. Sean P. McAlinden, lead author of the study and CAR’s chief economist.

“If the value of fuel savings to the new vehicle buyer falls short of the cost of mandated fuel economy technologies then U.S. automotive sales, production, and manufacturing and retail employment will fall with serious consequences for the U.S. economy.”

In two technology studies, CAR surveyed nine auto manufacturers and collected data to define the current state of lightweighting technology and establish a better baseline for the U.S. fleet, and to define the industry’s expected cost and effectiveness of powertrain technologies to meet the fuel economy mandates.   The Midterm Review of the mandates is providing an opportunity for industry input on regulatory costs and fuel economy efficiencies to the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA).  CAR believes it is important to take into account data from the companies who must develop and deploy these technologies, as these figures are critically important to projecting compliance with future standards.

“Manufacturers are pursuing many technology pathways.  No two manufacturers are at the same starting baseline, have the same product and technology portfolio, nor fuel economy strategy. Some manufacturers will bear a much greater burden than others,” according to Dr. Jay Baron, CAR’s CEO, and lead author of Assessing the Fleet-wide Technology and Costs to Lightweight Vehicles study. “Manufacturers are steadily deploying new technologies while managing increasing costs and technology barriers.”

The Lightweighting study provides insight into the technology and cost to reduce vehicle weight for the U.S. fleet of light-duty vehicles. This study collected automaker data on 42 vehicles from 4 segments (MY 2015), representing 50% of the U.S. light-duty fleet. Insights on automakers material technology plans for 5-15% vehicle mass reduction was also sought with the objective of helping to establish a data-based baseline for the U.S. fleet.  The research indicates automakers are already well up the cost curve for lightweighting technologies and real-world constraints limit the pace and amount of technology deployed as outlined by clean-sheet paper studies.  Costs for mass reduction greatly exceed those estimated to date by regulators and incremental mass reductions comes at exponentially higher costs.  While the EPA and NHTSA have acknowledged range in vehicle technology in their draft Technical Assessment Review, CAR believes it is valuable to use real world material technology data to improve the CAFE and GHG modeling.

In the Powertrain report, An Assessment of Powertrain Technology Costs Associated with Meeting CAFE and GHG Standards, CAR researchers collected and analyzed data from automakers and found that generally costs are higher, and efficiencies lower, than estimates developed by the regulators.  Modeling of the synergies of some technologies is one reason regulators may over-estimate the efficiencies of powertrain technologies.

Brett Smith, lead author of the Powertrain study, said, “It is not just a cost/efficiency challenge, it is a pathways challenge.  Regulators must find a way to create customer demand for the technologies, and support infrastructure development.”

CAR’s research demonstrates the industry has made significant progress in implementing fuel economy technologies, however, this progress comes at greater cost and with lower efficiencies than has been recognized by regulators, and given current fuel prices, consumers are largely unwilling to pay for fuel economy technologies.  All three reports are available on CAR’s website:  www.cargroup.org

The Center for Automotive Research is a non-profit organization based in Ann Arbor, Michigan. Its mission is to conduct research on significant issues related to the future direction of the global automotive industry, organize and conduct forums of value to the automotive community and foster industry relationships. CAR receives funding from multiple sources including state and federal government, industry associations, corporations and foundations.  For more information, visit the CAR website: www.cargroup.org.

# # #

Media Contact:

Katie Ramsburgh