Obama, automakers reach deal on CAFE

Barack Obama

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Updated 7/28/2011 at 2:00pm

Wednesday evening, Reuters reported that the Obama Administration and automakers reached a deal on the new CAFE standards. The rumors began circulating a few weeks back that OEMs could be forced to reach 56.2 miles per gallon fleet-wide between the 2017 and 2025 model years – more than 20 miles per gallon higher than the current standard through MY 2016.

Unlike the last round of negotiations in 2009, which resulted in a 35.5 fleet-wide requirement, the new standard did not get chiseled down as much. Tomorrow, the Obama Administration is expected to announce that the new CAFE standards will be 54.5 mpg by 2025, with a 5 percent increase per year for passenger vehicles and a 3.5 percent uptick for truck standards.

Overall Industry Impact

The new requirements do not solely impact the auto manufacturers, however. While the OEM must build the car to spec, the dealer must sell it. And let’s not forget the consumer who has to like the car enough in the first place to want to purchase it.So what does this mean for manufacturers, dealers, and consumers alike? That remains a concern for the National Automobile Dealers Association (NADA) and its members. The association’s Communications Director, Bailey Wood, had this to say about the impending CAFE standards in an email statement:

NADA is closely analyzing the public details of the deal with certain automakers on fuel economy standards for model years 2017-2025. Vehicle affordability and model choice remain paramount for dealers. If consumers are not willing or are not interested in putting these new vehicles on the road there could be serious ramifications for American workers, the economy, and little to no environmental benefit.

Safety Concerns

 Since our previous coverage of this issue, concerns have also risen regarding safety if manufacturers are forced to reduce vehicle weight in order to meet higher standards.  To paraphrase how a fellow automotive writer put it, “Physics is physics.” He’s right. The safety technologies, while advanced and effective, hardly matter when you put a small car in a crash with a larger vehicle. That car might get 60 mpg, but at what risk to the consumer driving it?

With the government setting the standard here, automakers are on the line to produce more small cars while also reducing the gas intake of their larger vehicle offerings. The fact is that on this trajectory rising CAFE standards and safety requirements will ultimately cross paths going in opposite directions, meaning that one or the other will be compromised.

While many details must be ironed out, Be Car Chic still has questions. How will the federal government and automakers work to ensure that the lighter vehicle weight does not compromise both consumers’ choices and their safety? Will consumers go along with the proliferation of smaller vehicles across the United States? What is the measurement of success at the dealer level? Please feel free to share your thoughts and perspectives in the comments section below.

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This article was written by

Melanie Batenchuk founded Be Car Chic in 2009 as a way to help consumers make smart decisions when buying and selling their cars. Her prior work at the dealership, trade association and manufacturer levels has provided her a deep understanding of the complex facets within the auto industry, making her a leading woman in her field.

There are 4 comments for this article
  1. Matt Keegan at 10:53 AM

    Ah, more government involvement. Soon, we’ll be driving the equivalent of a go-kart with safety sacrificed all in the name of energy independence and “saving the polar bears” or the latest “at risk” population.America is in a crisis and Obama is touting EPA standards. There is certainly something wrong in D.C.

  2. Dave Sinclair at 3:22 AM

    The only concern is that car prices may increase as a result of CAFE. The cost of the development of these efficient cars will most likely passed on to consumers.

  3. Melanie Batenchuk at 12:32 PM

    Dave,

    That’s certainly a good point, and one that will be watched closely as higher CAFE standards roll out in the coming years. But to counter your position, I believe that many automakers are already working to achieve higher MPG’s without passing the cost through to the consumer. Think about Hyundai and Ford and all the vehicles they have that get 40 mpgs.

    Thanks for stopping by the blog!

    Melanie