NCPA - National Center for Policy Analysis

CAFE Standards Distort Auto Production and Push Jobs South

September 30, 2016

Contributor Matthew Ruland writes at NCPA's Retirement/Taxes Blog:

Once praised for refusing to accept a bailout, Ford is now taking heat for deciding build all small cars in Mexico.  Ford already manufactures the Fiesta model in Mexico, and the Focus and C-Max will follow after the newly-proposed $1.6 billion plant is finished.  Given that Ford sales have risen strongly since the recession, what is the reason for this change in direction?  The easy answer -- labor costs. However, it is also likely that government regulations have helped them to shift jobs south.

In August of 2012, the Obama Administration called for more arduous demands in the Corporate Average Fuel Economy (CAFE) standards for automotive companies. President Obama raised the current mandate of 35.5 MPG (miles per gallon) to an ambitious 54.5 MPG by the year 2025.  But don\'t be fooled by this figure.  According to John O'Dell, senior editor at, "the government measures fuel economy -- in more lab-like, less real-world conditions -- so the actual mileage goal is closer to about 36 miles per gallon." Regardless, Obama's CAFE adjustment poses a tall task for automakers.

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