Automakers and other industry insiders are sounding an alarm over the “dramatic effect” of increasing fuel economy requirements on new-car sales.
One group, the National Auto Dealers Association (NADA), argues that rising standards will hurt consumers along with the industry by raising prices beyond Americans’ ability to pay for new vehicles.
The warnings come as the mid-September deadline nears for official comments on a federal government report that 2025 fuel-economy targets are about right as they stand.
The report also said automakers would fall short of the fleet-wide target of 54.5 mpg by up to 4.5 mpg.
“The drastic upswing of the miles-per-gallon compliance curve from now until 2025 is going to have a dramatic effect on vehicle prices – and not just the most fuel-efficient vehicles in the fleet, but up and down the entire lineup,” Wes Lutz, NADA regulatory affairs chairman, said recently.
“Every car, every truck, every SUV could soon be $5,000 more expensive than it is today,” said Lutz, who also is president of Extreme Chrysler/Dodge/Jeep, RAM Inc. in Jackson, MI. “On an average 60-month contract, $5,000 increases the monthly payment approximately $100.”
(The average monthly car payment runs about $500, based on data from Experian Automotive.)
Spending maxed out?
“Americans are maxed out, and can barely afford new cars as is,” Lutz said, citing a recent study by Bankrate.com which shows that even in the most affluent of 50 U.S. cities, San Jose, CA, the median-income household falls about $1,000 short of being able to pay the average price of a light vehicle.
This reality is clearly reflected in current buyer behavior, according to Lutz:
“I’m seeing this every day at my dealership in three major ways: consumers driving their current vehicle longer; buying used vehicles, or buying a vehicle that doesn’t fit their needs.”
Lutz was quoted by the Detroit Free Press as saying that an increase of $5,000 on a new vehicle “would crush my customers … would crush me as a dealer.”
Mitch Bainwol, CEO of the Alliance of Automobile Manufacturers, said it will be a “daunting challenge” to meet the 2025 fuel economy standards and that “excessive regulatory costs could impact both consumers and the employees who produce these vehicles.”
He cited a survey conducted by the AAM that showed just 7 percent of consumers would spend $5,000 more for a vehicle, while 70 percent would pay $2,000 or less.
“So the appetite to buy is really, really low,” Bainwol said, according to the newspaper.
However, federal officials believe the auto industry has made more progress than expected since 2012, demonstrating that it can make even more progress by 2025.
Chris Grundler of the Environmental Protection Agency thinks the current plan is working “spectacularly,” contending that “automakers are outperforming these standards while hitting new sales records … So, we think the industry is very well-positioned to meet the customer expectations while reaching significant new levels of environmental performance.”
We only have nine years – and about 150 million vehicles – to see which prediction is correct.