Obama Mileage Mandate Will Fuel Auto Disaster

September 6, 2012

The Obama administration recently announced the latest "corporate average fuel economy" (CAFE) standards.  They will require the average fuel economy of all the cars an automaker sells to almost double to 54.5 miles per gallon by 2025, says Investor's Business Daily.

Automakers largely back the new standard, but the industry admits the mandate will require significant change in the kind of cars automakers build and sell.

  • Consider, the Smart car gets just 36 miles per gallon (mpg).
  • And no hybrid on the market today meets the mileage goal.
  • The Honda Fit would need to get 61 mpg by 2025, according to the National Highway Traffic Safety Administration -- double what it gets today.
  • In contrast, the Environmental Protection Agency gives electric cars huge "miles per gallon equivalent" (mpge) ratings -- the all-electric Nissan Leaf gets a 99 mpge rating, the Volt a 60.

That, along with generous credits for electric cars in the new CAFE rule, means automakers will have little choice but to try to push plug-in cars onto the market. This is small comfort to consumers, who clearly aren't interested in buying them.

  • Even today, regular old hybrids make up a paltry 2 percent of the market.
  • Consumers are even less interested in plug-in cars.
  • Volt sales were 23 percent below what GM expected last year, and they're falling well short of this year's goal.
  • Leaf sales are down 26 percent.
  • And that's despite an extraordinarily generous electric-car rebate in the form of a $7,500 tax credit.

On top of this, all the fuel-saving technologies mandated by Obama's CAFE rule will boost car costs by around $3,000, according to the National Automobile Dealers Association, pricing 7 million people out of the market.

The new CAFE rule does give automakers an out, if they're able to show in 2017 that they just can't hit the mark.

Source: "Obama Mileage Mandate Will Fuel Auto Disaster," Investor's Business Daily, September 4, 2012.

 

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