MPG report sets stage for debate

WASHINGTON -- It has officially begun: The process that will shape the powertrains and fuel efficiency of U.S. autos through 2025 kicked off last week with the release of an exhaustive technical study by U.S. and California environmental regulators.

With the launch of the legally required midterm evaluation, environmentalists, regulators and the industry began battling over whether to keep the standards the same and accept a lower fleet average or to adjust them to reflect market and technology changes since the rules were written.

Agencies hailed the findings of the 1,217-page draft "Technical Assessment Report" as evidence that the industry is ahead of schedule in complying with the Obama administration's ambitious National Program of harmonized greenhouse gas and fuel economy regulations. The EPA, National Highway Traffic Safety Administration and California Air Resources Board, the groups that issued the report, said the industry has ample technology available to achieve the challenging targets without relying too heavily on full hybrid and electric vehicles.

But they also noted that if the 2025 model year standards remain unchanged, the industry won't reach the 54.5-mpg fleet target trumpeted when the rules were announced in 2011. Consumers are buying too many light trucks to make that happen.

"Getting the midterm review analysis right is crucial for everyone," the Alliance of Automobile Manufacturers said in a statement. "It will be a daunting challenge to meet the very aggressive requirements of the 2022-2025 federal fuel economy regulations and greenhouse gas rule."

But environmental groups argue that the report shows the original goals are firmly within the industry's grasp:

"Continuing to strengthen clean vehicle standards is good for America's consumers -- and it's absolutely critical to bringing about cleaner, healthier air and a more stable climate," said Luke Tonachel, director of the Clean Vehicles and Fuels Project at the Natural Resources Defense Council.

The draft "Technical Assessment Report" provides automakers and regulators with a common set of data on technology, cost and efficiency to inform the midterm review.

Robert Bienenfeld, assistant vice president for U.S. environmental strategy at Honda, says automakers will scrutinize whether the report's findings on technologies such as stop-start, 48-volt mild hybrids and many others line up with their own.

"From that we can move on to the policy implications," he said, noting that Honda supports reducing greenhouse gas emissions. "We think it's very important, and we think directionally, the goals are right. It's a matter of how much cost and time."

Already, a key selling point in the 2025 rules has been revised -- the 54.5-mpg target itself.

That target was a projection based on the assumption that 67 percent of production in 2025 would consist of cars, and 33 percent would be pickups, SUVs and crossovers. Low fuel prices have kept demand for pickups, SUVs and crossovers at around 50 percent of the market, prompting regulators to update their outlook. The technical report said the current regulations and projected market mix mean the 2025 fleet average will be closer to 51 mpg.

Stephanie Brinley, a senior analyst with IHS Automotive, said that revision is an example of the kinds of assumptions that are designed to be adjusted as time goes on.

Brinley said the midterm evaluation is a "transparent system and process" that is "more collaborative" than past auto regulatory pushes. But that doesn't mean there won't be friction, she said.

One key point to work out likely will be the extent to which automakers must develop and sell electric cars to meet the 2025 standards.

The "Technical Assessment Report" echoed previous projections by the EPA that automakers could meet the 2025 standards primarily by improving gasoline engines and only modestly deploying plug-in hybrids and EVs.

The EPA expects electric cars to account for less than 3 percent of the 2025 U.S. fleet, factoring in sales required by California's Zero Emission Vehicle mandate. NHTSA expects a less than 2 percent electric car mix to meet its corporate average fuel economy targets, a projection that does not factor in the ZEV mandate.

Brinley said those assumptions underestimate how much the industry will need to rely on electrification and weight reduction to meet the target.

"There does seem to be an element of the regulators saying, "We think this can be done,'" Brinley said. "The industry is a little more concerned about its ability to meet those targets with internal combustion engines and under the conditions that the agencies assume."

Other findings of the report show how the industry has rapidly adopted fuel-saving technologies. Some 45 percent of 2015 model year vehicles had gasoline direct injection, up from just 2 percent in the 2008 model year, the baseline used by agencies to track progress.

In the same period, six-speed transmissions jumped to 57 percent from 19 percent of the fleet while gearboxes with seven or more speeds grew to 17 percent from 2 percent. Continuously variable transmissions jumped to 20 percent from 8 percent.

Continuing to make such changes will get tougher in the future, Bienenfeld said.

"As the regulations become more and more stringent, there are fewer technologies that can help us achieve those more ambitious goals," he said, "and more electrification will be required as we move into the future."