What New Mileage Rules Mean to Consumers
Today, President Barack Obama officially announced a new federal policy to raise the average gas mileage of cars and trucks, as well as reduce greenhouse gas emissions. These new regulations will take effect four years earlier than the old plan, headed by former President George Bush. Also unlike the Bush plan, the EPA and Department of Transportation will develop rules and penalties to enforce the new plan.
However, when you hear the news tonight that average fuel economy in 2016 will be 39 mpg for cars and 30 mpg for trucks, don't think that’s what you'll find on window stickers. The new policy is referencing CAFE standards, which use a unique formula — not real-world testing, which is what the EPA uses to determine the mileage displayed on new cars’ window stickers. We pointed out yesterday that a Toyota Corolla has an EPA-estimated combined mileage rating of 30 mpg and a CAFE rating of 40 mpg. Last year, Cars.com used just EPA ratings to determine automakers’ overall mileage in its first True Mileage Index. The winner, Honda, averaged 24.4 mpg for its fleet; its CAFE rating is 35.1 mpg.
The first increases to the fleet averages will come in 2012. The exact numbers aren’t set yet, but it's unlikely they’ll require many major changes in manufacturers’ lineups versus what they've already planned. By 2016, however, when the 39-mpg-cars/30-mpg-trucks requirements roll around, even the generous CAFE formula won’t prevent automakers from having to shift what cars they build.
Expect to see fewer large sedans, fewer V-8 engine options and fewer truck-based SUVs. They'll be replaced by turbocharged engines and car-based crossovers. Automakers gain much more ground in CAFE ratings by boosting a gas-guzzler's mileage 1 mpg than they would by doing the same to a more efficient model. We expect the recently reignited muscle-car wars to peter out quite a bit, and the ever-escalating towing wars among light-duty pickups to ease as well.
More advanced engines of all types will have to be put into even the most affordable cars to increase mileage. The government predicts that the cost of building a new car will rise $1,300 due to the increased fuel standards. Expect that cost to be passed on to consumers.
The interesting wrinkle in this plan has to do with the administration of CAFE itself. There are a lot of exceptions in the current rules for biofuels, along with loopholes for heavy-duty trucks and fleet sales. We would guess that future alternative-fuel vehicles, like Chevy's Volt, could greatly impact CAFE ratings in a positive way for automakers. This might give them some flexibility to build a wider variety of cars. Either way, it’s unlikely the current mix of models will continue past 2016.
Video above via Politico.