This fall, the Obama administration has a tremendous opportunity to cut our oil dependency, reduce carbon pollution and create clean energy jobs by proposing a 62 mpg corporate average fuel economy standard by the 2025 model year.
By setting the bar high, the president can ensure that the U.S. auto industry does not relinquish its nascent technology leadership in electric-drive vehicles. A strong standard also will ensure that the industry keeps moving forward with its new focus on fuel efficiency, which by its own admission is the key to its current competiveness.
President Barack Obama has directed the National Highway Traffic Safety Administration and the EPA, in partnership with the California Air Resources Board, to propose joint fuel-efficiency and pollution standards for new passenger cars and light trucks for the 2017-25 model years.
The next set of regulations is a chance for the administration and the auto industry to show the world that the United States can step up its game, close the gap with other nations and become a global pacesetter.
The Alliance of Automobile Manufacturers has put forth grossly exaggerated cost claims based on faulty assumptions. In letters to Congress, the alliance claimed that a 62 mpg standard would raise the price a consumer pays for a car by as much as $6,400 — twice as much as the average amount NHTSA, the EPA and CARB have estimated — and lead to a loss of as many as 220,000 automotive jobs. But those claims do not hold up to scrutiny. High mpg standards can be profitable and help boost U.S. fuel-efficiency technology innovation.
Sales for the first four months of 2011 should help erase any remaining doubt about consumer demand. The market has spoken, and it wants more mpg. According to hybridcars.com, hybrid sales rose 25.6 percent in the first four months of 2011 from the same period last year, faster than the overall market growth of 20 percent.
Sales of small cars rose 29 percent through the first four months, according to the Automotive News Data Center.
It should come as no surprise that Ford Motor Co. just posted its most profitable first quarter since 1998. Ford CEO Alan Mulally was prescient when he shifted Ford’s fuel-efficiency plans to the fast lane when he arrived in 2006. Fortunately, the country also moved forward with stronger standards in 2007 that help accelerate Ford’s transition to fuel efficiency.
Now Ford is reaping the benefits. According to Mulally, “With the fuel prices moving up, we now have the vehicles that people want.”
Some smart auto executives realize that stronger standards are good for the U.S. auto industry’s competiveness. According to the March 14 Automotive News article “Buyers move toward better fuel economy”: “Many automakers believe that the work they’ve done since the last big price surge, and in anticipation of higher government fuel economy standards, leaves them better prepared this time, with stables of more competitive small cars and crossovers.”
Detroit could be an even bigger winner in the future. Recently, a report from Citi Investment Research & Analysis — on an evaluation Citi did in collaboration with Ceres, the University of Michigan Transportation Research Institute, the Natural Resources Defense Council and others — said that stronger fuel efficiency standards “may actually have positive implications for sales units and variable profits for both the industry and the Detroit 3 in particular.” By 2020, the report says, the Detroit manufacturers could see a profit increase of $5.1 billion.
Make no mistake: High gasoline prices are here to stay, and along with them, consumer and political demand for more fuel-efficient cars. Arun Majumdar, the acting undersecretary of energy, summarizes the new oil market realities: “What’s different is that if you look at the growth of other economies, like China and India ... I think the demand for oil is going to go up, and that (oil) prices in the future will likely on average go up.”
Even before the recent gasoline price spike, poll after poll showed that Americans get it when it comes to fuel economy. A 60 mpg standard, even if it costs $3,000 but pays for itself in four years? Respected pollster Mark Mellman of the Mellman Group found in a September 2010 national poll conducted for the Natural Resources Defense Council and three other environmental groups that an overwhelming 83 percent of Americans support such a standard.
Nearly 60 years ago, then-General Motors President Charles Wilson said that what was good for the country was good for General Motors and vice versa. A 62 mpg standard would be good for America and all U.S. automakers. The U.S. car industry and the nation need to hold to the challenge of setting — then achieving — the highest possible fuel efficiency and pollution standards.