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What Obama’s Doubling of Fuel Economy Will Cost



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The Wall Street Journal:

The Obama administration may require auto makers to roughly double the average fuel economy of their car and light truck fleets from current levels to 56.2 miles per gallon by 2025.

White House officials outlined the plan to auto industry officials last week, said two people familiar with the matter, setting off a fight among auto makers, environmentalists and others.

Car makers say the proposal would effectively require most new vehicles sold in the U.S. to be battery-powered by 2025 and raise prices by thousands of dollars. Makers of electric vehicle technology say declining costs for lithium batteries will allow the auto industry to make big gains in fuel efficiency without stoking sticker shock.

Environmental groups, meanwhile, said they were generally pleased with the Obama proposal; they had sought a 62-miles-per-gallon standard.

The new plan, being drafted jointly by the Department of Transportation and the Environmental Protection Agency, would build on the administration’s new rules put in place last year that requires new cars and light trucks sold in the U.S. to average 35.5 mpg by 2016, up from 27.3 mpg today.

Auto makers, particularly Detroit companies like General Motors Co. and Ford Motor Co. that build bigger cars and sport-utility vehicles, are fighting for a lower target, or provisions that would allow larger vehicles if gas prices moderate.”

The government’s own reports indicate that this would be a steep climb with costs,” said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, the industry’s main trade group. She said research shows such big gains in fuel economy could raise vehicle prices by $6,000 or more.

Government officials have estimated the costs of the new standards would add between $770 and $3,500 to a new car in 2025.

The rest here.

Meanwhile, also in the Journal, Sam Kazman notes a Center for Automotive Research study which suggests that the real cost may be much higher:

The Department of Transportation is floating 62 mpg as a possible standard for 2025, more than double the current 27.5 mpg standard. How the industry can meet that target, and at what cost, is anyone’s guess. A new study in mid-June by the nonprofit Center for Automotive Research in Ann Arbor, Mich. put the tab at about $10,000 extra per new vehicle, while admitting that even this estimate might be far too low.



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