U.S. completes 54.5 mpg fuel-economy mandate for light vehicles

August 28, 2012 01:00 AM

Angela Greiling Keane

WASHINGTON (Bloomberg) -- President Barack Obama released a final version of a rule forcing automakers to more than double average fuel economy by 2025 that includes changes benefiting Honda Motor Co. and other makers of alternative-fuel vehicles.

"By the middle of the next decade, our cars will get nearly 55 miles per gallon, almost double what they get today," Obama said today in an e-mailed statement. "It'll strengthen our nation's energy security, it's good for middle class families and it will help create an economy built to last."

Corporate average fuel economy, or CAFE, rules released today and that took effect earlier this year are supposed to reduce U.S. oil consumption by 12 billion barrels and lead to fuel savings of more than $8,000 by 2025 over the life of a vehicle, the White House said.

Boosting average fuel economy is part of Obama's plan to reduce oil imports and use. Promoting purchases of more fuel-efficient vehicles can help reduce the use of fossil fuels.

Reactions to the new standards

The long-awaited federal fuel efficiency standards were released today. Here are some official reactions to the 54.5 mpg fleet average for U.S vehicles by 2025.

Volkswagen Group of America:

"Volkswagen Group of America (VW) continues to support a single national standard for greenhouse gas (GHG) emissions regulation for 2017-25. However, VW did not endorse the Notice of Proposed Rulemaking (NPRM) in part because it believed the compliance burdens were not equitably shared across the industry. Following an initial review, the Final Rule reflects the NPRM by imposing very high GHG reductions on passenger cars, and much lower reductions on light trucks. VW continues to believe that this places an unfair burden on manufacturers focused primarily on passenger cars -- the segment of the fleet already delivering to consumers the most fuel efficient, low CO2 emitting vehicles -- and fails to achieve an equitable burden across the full range of light-duty vehicles. In addition, the Final Rule grants valuable compliance credits to certain fuel-saving technologies while failing to equitably recognize the environmental benefits of others."

Ford and Chrysler responded through the Alliance of Automobile Manufacturers:

“The Auto Alliance has called for a single, national program because conflicting requirements from several regulatory bodies raise costs, ultimately taking money out of consumers' pockets and hurting sales. We all want to get more fuel-efficient autos on our roads, and a single, national program with a strong midterm review helps us get closer to that shared goal."

Toyota Motor Corp.:

“As we have said all along, the standards pose a formidable challenge for our engineers and product planners. But our overriding objective has been to avoid state-by-state regulation of fuel economy and greenhouse gas regulations. The agreement reached last year, and the regulations finalized today, are a step in the right direction toward this goal.”

General Motors Co.:

“While the requirements are aggressive, we intend to pursue them vigorously by utilizing our strong history of innovation and technology development. As the rule also provides, however, further assessments and reviews will be undertaken to see if the underlying assumptions used to set the fuel economy and greenhouse gas requirements are achievable and realistic in the years well into the future.”

Adam Lee, chairman of Lee Auto Malls of Maine:

"As a third-generation auto dealer, I can say with absolute confidence that my customers want cars, trucks and SUVs that go farther on a tank of gas. I support the 54.5 mpg standard because it will keep American automakers competitive in the world market, it will keep my customers happy, and it will help me to sell even more cars. Automakers, consumers and consumer experts, national security leaders and environmentalists all back the standards because they will save families money, cut America's oil dependence, drive greater innovation in the auto industry, and improve our environment."

UAW President Bob King:

"These new standards will help propel the auto industry forward by giving American families long-term relief from volatile fuel prices. Lowering the total cost of driving will make automobiles more affordable and expand the market for new vehicles. The standards will also provide certainty for manufacturers in planning their investments and creating jobs in the auto industry as they add more fuel-saving technology to their vehicles. Bringing this additional content to market requires more engineers and more factory workers, expanding employment in the industry."

Frances Beinecke, president of the Natural Resources Defense Council:

“Everybody is a winner today. Motorists win because they will have much more fuel-efficient cars to drive, thus saving thousands of dollars at the gas pump every year. The auto industry -- and its workers -- win because these standards will spur the creation of thousands of new jobs as well as state-of-the-art vehicles that go nearly twice as far on the same gallon of gasoline.”

Michelle Robinson, director of the clean vehicles program for the Union of Concerned Scientists:

“This is truly a watershed moment. Twenty years from now we'll be looking back on this as the day we chose innovation over stagnation. These standards will protect consumers from high gas prices, curb global warming pollution, cut our oil use, and create new jobs in the American auto industry and around the nation.”

U.S. Rep. John Dingell, D-Mich.:

“Of critical importance in the standard is the mid-term review, which will allow all parties to take a step back and reevaluate, making necessary adjustments. In addition, the flexibilities built into the program are of the utmost importance. Finally, and most importantly, this is one national standard. A patchwork of different standards would have been a disaster for the economy.”

Mark Cooper, director of research, Consumer Federation of America:

"This is not only a big win for consumers, it is vital to the U.S. auto industry and the single most important thing we can do to end America's addiction to oil - something President George W. Bush called “a serious problem" - and to improve our national energy security. The many benefits of this policy are so clear that is has garnered widespread support from the public, automakers, auto workers, national security experts, public health advocates and environmentalists."

Erika Nielsen, director of marketing at BorgWarner Inc.:

“Automakers are looking for solutions that provide better fuel economy and reduce emissions while maintaining performance. That means new opportunities for our company, because our turbochargers, variable cam timing, dual clutch transmission modules and other powertrain technologies can help provide cleaner vehicles while maintaining or improving performance.”

Jake Fisher, director of auto testing for Consumer Reports magazine:

“Gasoline prices and fuel economy are clearly on consumers' minds when they go to buy a new vehicle. Our surveys show that consumers are interested in finding new ways to achieve that, like turning to hybrids and other alternatively fueled vehicles. The new fuel-efficiency standard will help provide consumers with a fleet of vehicles that will reduce the bill at the gas station.”

-- Compiled by Vince Bond and Philip Nussel

The Environmental Protection Agency and National Highway Traffic Safety Administration released the proposed rule for model years 2017 to 2025 in November after reaching an agreement with automakers on the outline in July 2011. Auto executives from companies including General Motors Co., Ford Motor Co., Chrysler Group LLC and Hyundai Motor Co. stood with Obama at the Washington Convention Center to tout the agreement, which was the basis for the final rule.

The proposed rule granted incentives to plug-in electric and plug-in electric-hybrid vehicles, with the final rule adding natural-gas-powered cars to that list. Honda sells vehicles powered by natural gas.

Price tag: $192 billion

The 2025 rule and one that took effect this year and applies through 2016 could together cost as much as $192 billion, according to administration estimates. The administration has said the 2017-2025 rule would save as much as $515 billion in fuel spending as they add an average of $2,000 to the price of each new passenger vehicle by 2025.

The proposed rule required automakers to improve car fuel economy by an average of 5 percent annually and trucks' by 3.5 percent in most years.

Obama had delayed release of the final version from a self-imposed Aug. 15 deadline. The proposed rule was criticized by U.S. Rep. Darrell Issa, R-Calif., and foreign automakers as a sweetheart deal for U.S. automakers, especially GM and Chrysler Group LLC, which received government bailouts.

German automakers Daimler AG and Volkswagen AG didn't sign agreements, saying the plan gave an advantage to light trucks, primarily made by U.S. automakers. Honda, which signed the agreement, made similar assertions in e-mails that Issa's committee released earlier this month.

Consumers have been slower to embrace electric vehicles than automakers had hoped for, in spite of a $7,500 U.S. tax credit for buyers. Customers bought fewer GM Chevrolet Volts and Nissan Motor Co. Leafs than the automakers produced in 2011, the first year of U.S. sales of plug-in electric vehicles made by mass-market manufacturers.

Electrics, hybrids

Selling more hybrid and plug-in electric vehicles would help automakers meet CAFE targets. Toyota Motor Corp.'s Prius, the best-selling hybrid vehicle, sold 136,463 cars last year, accounting for 1.1 percent of light-vehicle sales in the U.S., according to the Bloomberg Government analysis.

Luxury automakers including Daimler and BMW will have a harder time complying with the rule than will full-line manufacturers that can balance gas guzzlers with fuel sippers, the analysis found.

Proponents of increasing fuel economy have complained about a provision that a Public Citizen official labeled "wiggle room" because it allows for a review of the rule in 2018 and adjustment of the mandate.

"We won't kid ourselves about the automakers' plans for compliance," Tyson Slocum, director of the consumer-advocacy group's energy program, said in an Aug. 23 statement. "We can be sure the industry will attempt to make a case that it is too expensive to meet the federal goal of 54.5 mpg. And you can be just as sure that we will be there, working to hold them to it."

Jobs pledged

The Natural Resources Defense Council and BlueGreen Alliance say the rule could create as many as 570,000 jobs by boosting demand for new technologies.

Transportation Secretary Ray LaHood said on the conference call that the rule "may lead to new jobs," declining to give an estimate.

The new standards give automakers flexibility in how to meet them and result in different improvement targets among automakers, a Bloomberg Government study found. While they will require fuel-economy increases, because of the way the rule is structured and credits it offers automakers, car buyers won't see fuel-economy gains of that scope on window stickers.

The fuel component of the rule will require an average of 49.6 mpg for automakers' fleets by 2025, while the corresponding carbon dioxide-emissions requirement will yield 54.5 mpg, according to Bloomberg Government.

Regulators can levy fines on automakers who don't meet the requirements, which are based on vehicles that consumers buy rather than the fleet produced by the manufacturers.

PRESS RELEASE: Obama Administration Finalizes Historic 54.5 mpg Fuel Efficiency Standards

Consumer Savings Comparable to Lowering Price of Gasoline by $1 Per Gallon by 2025

WASHINGTON, DC – The Obama Administration today finalized groundbreaking standards that will increase fuel economy to the equivalent of 54.5 mpg for cars and light-duty trucks by Model Year 2025. When combined with previous standards set by this Administration, this move will nearly double the fuel efficiency of those vehicles compared to new vehicles currently on our roads. In total, the Administration's national program to improve fuel economy and reduce greenhouse gas emissions will save consumers more than $1.7 trillion at the gas pump and reduce U.S. oil consumption by 12 billion barrels.

"These fuel standards represent the single most important step we've ever taken to reduce our dependence on foreign oil," said President Obama. "This historic agreement builds on the progress we've already made to save families money at the pump and cut our oil consumption. By the middle of the next decade our cars will get nearly 55 miles per gallon, almost double what they get today. It'll strengthen our nation's energy security, it's good for middle class families and it will help create an economy built to last."

The historic standards issued today by the U.S. Department of Transportation (DOT) and the U.S. Environmental Protection Agency (EPA) build on the success of the Administration's standards for cars and light trucks for Model Years 2011-2016. Those standards, which raised average fuel efficiency by 2016 to the equivalent of 35.5 mpg, are already saving families money at the pump.

Achieving the new fuel efficiency standards will encourage innovation and investment in advanced technologies that increase our economic competitiveness and support high-quality domestic jobs in the auto industry. The final standards were developed by DOT's National Highway Traffic Safety Administration (NHTSA) and EPA following extensive engagement with automakers, the United Auto Workers, consumer groups, environmental and energy experts, states, and the public. Last year, 13 major automakers, which together account for more than 90 percent of all vehicles sold in the United States, announced their support for the new standards. By aligning Federal and state requirements and providing manufacturers with long-term regulatory certainty and compliance flexibility, the standards encourage investments in clean, innovative technologies that will benefit families, promote U.S. leadership in the automotive sector, and curb pollution.

"Simply put, this groundbreaking program will result in vehicles that use less gas, travel farther, and provide more efficiency for consumers than ever before—all while protecting the air we breathe and giving automakers the regulatory certainty to build the cars of the future here in America," said Transportation Secretary Ray LaHood. "Today, automakers are seeing their more fuel-efficient vehicles climb in sales, while families already saving money under the Administration's first fuel economy efforts will save even more in the future, making this announcement a victory for everyone."

"The fuel efficiency standards the administration finalized today are another example of how we protect the environment and strengthen the economy at the same time," said EPA Administrator Lisa P. Jackson. "Innovation and economic growth are already reinvigorating the auto industry and the thousands of businesses that supply automakers as they create and produce the efficient vehicles of tomorrow. Clean, efficient vehicles are also cutting pollution and saving drivers money at the pump."

The Administration's combined efforts represent the first meaningful update to fuel efficiency standards in decades. Together, they will save American families more than $1.7 trillion dollars in fuel costs, resulting in an average fuel savings of more than $8,000 by 2025 over the lifetime of the vehicle. For families purchasing a model Year 2025 vehicle, the net savings will be comparable to lowering the price of gasoline by approximately $1 per gallon. Additionally, these programs will dramatically reduce our reliance on foreign oil, saving a total of 12 billion barrels of oil and reducing oil consumption by more than 2 million barrels a day by 2025 – as much as half of the oil we import from OPEC each day.

The standards also represent historic progress to reduce carbon pollution and address climate change. Combined, the Administration's standards will cut greenhouse gas emissions from cars and light trucks in half by 2025, reducing emissions by 6 billion metric tons over the life of the program – more than the total amount of carbon dioxide emitted by the United States in 2010.

President Obama announced the proposed standard in July 2011, joined by Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota, and Volvo, as well as the United Auto Workers. The State of California and other key stakeholders also supported the announcement and were integral in developing this national program.

In achieving these new standards, EPA and NHTSA expect automakers' to use a range of efficient and advanced technologies to transform the vehicle fleet. The standards issued today provide for a mid-term evaluation to allow the agencies to review their effectiveness and make any needed adjustments.

Major auto manufacturers are already developing advanced technologies that can significantly reduce fuel use and greenhouse gas emissions beyond the existing model year 2012-2016 standards. In addition, a wide range of technologies are currently available for automakers to meet the new standards, including advanced gasoline engines and transmissions, vehicle weight reduction, lower tire rolling resistance, improvements in aerodynamics, diesel engines, more efficient accessories, and improvements in air conditioning systems. The program also includes targeted incentives to encourage early adoption and introduction into the marketplace of advanced technologies to dramatically improve vehicle performance, including:

Incentives for electric vehicles, plug-in hybrid electric vehicles, and fuel cells vehicles;

Incentives for hybrid technologies for large pickups and for other technologies that achieve high fuel economy levels on large pickups;

Incentives for natural gas vehicles;

Credits for technologies with potential to achieve real-world greenhouse gas reductions and fuel economy improvements that are not captured by the standards test procedures.