Dealers Warn Fuel Rules Will Boost Car Costs By $5000: We Break It Down

January 18, 2012

Back in November, the Environmental Protection Agency and the Department of Transportation announced new fuel-efficiency regulations affecting vehicles built through 2025. Many automakers and environmental groups have praised the guidelines, but dealers warn that they could boost the cost of new cars by as much as $5,000. We'll try to cut through the spin so you know what to expect down the road.

What are the new guidelines?

In a nutshell, the new Corporate Average Fuel Economy (CAFE) regulations say that by 2025, automakers who sell vehicles in the U.S. will need to achieve a fleet-wide average of 54.5 miles per gallon. The specific rules vary by weight and class, meaning that passenger cars will need to achieve a combined rating of 62 mpg, while trucks and SUVs will have a far lower threshold of 44 mpg.

If those numbers sound high, they should: they're meant to sound impressive to an increasingly green-minded public. But remember, CAFE stats and real-world fuel-economy stats are two different things. Tracking through the math is best left to a separate article (like this one), but at heart, the CAFE rating for a vehicle is higher than its real-world fuel-economy. So chances are good that 2025 cars will be able to achieve less than 62 mpg and still earn that rating from the EPA.

Who likes the new regulations (and why)?

Obviously, environmental groups like the new CAFE rules because they promise to reduce auto emissions. In theory, they'll also scale back America's dependence on oil and reduce the need for drilling. 

Most automakers like the regulations, too, because they differentiate between classes of vehicles. That's important in the American market, where big vehicles -- especially SUVs and pickup trucks -- remain very popular. Automakers like GM and Ford, who sell many of those larger rides, will have an easier time meeting the new CAFE regulations because the EPA won't hold every vehicle to the same standard. In 13 years, chances are good that those automakers will be able to boost fuel efficiency and meet the new thresholds without having to develop entirely new powertrain technologies.

Who loathes them (and why)?

A handful of automakers have expressed concern about the new rules. Volkswagen in particular has been vocal in its criticism of the CAFE regs because -- according to VW -- they give truck and SUV manufacturers a break. For a company like VW, which relies mostly on passenger car sales in the U.S., that makes the road ahead far more difficult. Here's part of a statement from Tony Cervone, executive vice president of communications for Volkswagen of America, that was issued back in July, when the Obama administration announced what amounted to a rough draft of the EPA guidelines:

"Volkswagen does not endorse the proposal under discussion. It places an unfairly high burden on passenger cars, while allowing special compliance flexibility for heavier light trucks. Passenger cars would be required to achieve 5% annual improvements, and light trucks 3.5% annual improvements. The largest trucks carry almost no burden for the 2017-2020 timeframe, and are granted numerous ways to mathematically meet targets in the outlying years without significant real-world gains.

"The proposal encourages manufacturers and customers to shift toward larger, less efficient vehicles, defeating the goal of reduced greenhouse gas emissions.

"Volkswagen Group clean diesel products are among the most fuel efficient vehicles on the road today. Our new mid-size Passat TDI, built here in the US in Chattanooga, TN, achieves 43 mpg highway and can travel almost 800 miles on a single tank of fuel. If one-third of the vehicles on the road today were clean diesel, the US would save 1.4 million barrels of oil a day. Yet there is no consideration in the current proposal for the positive impact clean diesels can have on fuel consumption here in the US."

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