Ramping Back on New Car Mileage Requirements

On Thursday August 2nd, 2018, the American Administration revealed its long-anticipated plan to roll back the Corporate Average Fuel Economy [CAFE] standards – originally established in the 1970s in response to the Middle East Oil Embargo.  CAFE was intended to cut fuel consumption for environmental betterment and bolster US energy security.

The CAFE rules required automakers to increase the average fuel efficiency of passenger vehicles through 2025; the new plan would freeze those levels after 2020.  The difference is a matter of averages over the whole fleet of cars and light-duty trucks that automakers release each year: by 2026—37 mpg under the proposed new plan compared to near 50 mpg under the existing administration rules.

The purpose behind the current plan is to ease the regulatory burden on American automakers, thereby also supporting ongoing consumer uptake of safer, and ever-cleaner new vehicles, an uptake that might otherwise be slowed by the higher price tags that, some say, would inevitably result from the expense of developing technologies necessary to squeeze even more mileage out of a gallon of gasoline.

Another aspect of the new plan is to harmonize these standards across the nation.  Traditionally California has had a waiver from the federal CAFE standards to enable it to combat pollution levels higher than the rest of the country.  Sixteen other states plus Washington, DC have adopted these standards.

The American Environmental Protection Agency and the National Highway Traffic Safety Administration appear to support the new plan saying it will reduce societal costs by as much as $500 billion over a number of years, and highway deaths by as many as 1,000 per year, in part by making newer, safer autos more affordable.  They also support revoking California’s authority to set its own rules, rules that currently include an electric-car mandate.

With the expiry of the October 26th deadline for public response, auto manufacturers are now having their say.  Mark Reuss, GM’s executive VP of global product development has been quoted as saying “[w]e know…we can do better” and “we know…the industry can do better” than the current proposal.

GM is proposing adoption into the national standards of a version of the California electric-car mandate starting with a 7 percent mandate in 2021 that grows to 25 percent by 2030, premised on battery manufacturing costs reaching $70 per kilowatt-hour, one-third of their current cost.  Once the 25 percent goal is met — by which time GM says there will be 7 million zero-emission cars on the road, up from just over 1 million today — the EV market will be self-sustaining and the program can expire.  This proposal does not address the issue of tax credits for EVs. GM’s current line-up of EVs includes the Chevrolet Bolt EV, the Volt hybrid, and Cadillac CT6 plug-in.  Reportedly, it is currently planning to offer 20 models by 2023.

Honda is said to be calling for the steadily increasing requirements to continue, saying that pursuing the new plan would “bring years of uncertainty for the auto industry” while state and federal regulators duke it out in court.