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CAFE Debate Will Reshape Industry Over The Next 10+ Years

Jun 03, 2011

Ongoing negotiations in Washington could profoundly change consumers’ choices in cars and trucks over the next 13 years. New federal fuel economy and emissions rules took effect January 1, 2011, requiring automakers to hit 35.5 MPG corporate average fuel economy by the 2016 Model Year. But automakers and regulators from the Environmental Protection Agency (EPA), the National Highway Traffic Safety Administration (NHTSA) and the California Air Resources Board already are haggling over a tougher proposal initiated by President Barack Obama in October 2010. That plan calls for a CAFE range of 47 MPG to 62 MPG by the 2025 Model Year. Industry press report that manufacturers are concerned that the 62 MPG CAFE, sought by environmentalists, could be too costly and may not be feasible. One industry ally says hitting 62MPG would add nearly $10,000 to the price of a new vehicle, while federal agencies say the cost would be about $3,500 per vehicle and would be offset by consumer fuel pump savings. The concern, for industry representatives and federal officials alike, is the impact on consumers. Imposing additional costs could depress car sales and cost the industry jobs. In September 2011, federal rule makers will propose standards for the 2017-25 Model Years, followed by a public comment period. The debate over clean technology and its costs will continue until July 2012, when new standards are scheduled to be adopted.