Auto Industry Exceeds Low Expectations: Good News, Bad News For Fuel Economy

October 4, 2013

Back in 2011, the National Highway Traffic Safety Administration and the Environmental Protection Agency issued new standards for corporate average fuel economy -- CAFE for short. While the regulations themselves are fairly complex, the gist is that automakers will have to achieve fleet-wide fuel economy of 54.5 mpg by 2025. Passenger cars will be held to a higher standard (62 mpg), while trucks and SUVs have a lower goal (44 mpg).

Some loved the new regulations, particularly consumer and environmental groups who looked forward to the greener cars that the rules would inspire. Others loathed them, particularly European automakers like Volkswagen, who said that they gave U.S. companies an advantage thanks to the huge numbers of trucks and SUVs that Chrysler, Ford, and GM manufacture.

Nearly all, however, agreed that the new standards would be a challenge to achieve. But according to the University of Michigan Transportation Research Institute, things are off to a fairly good start.

In the first two years of the program, CAFE averages have slightly surpassed NHTSA's expectations. For model-year 2012 vehicles, the average was predicted to be 28.7 mpg, but the actual figure was 28.9. For model-year 2013, the CAFE average was predicted to be 29.7, but in fact clocked in at 29.8 mpg.

That's the good news.

NHTSA's corporate average fuel economy (CAFE) expectations, via UMTRI

NHTSA's corporate average fuel economy (CAFE) expectations, via UMTRI

The bad news is that NHTSA's expectations are below actual CAFE standards. NHTSA expects that automakers will be unable to meet the new regulations directly through fuel-economy improvements. The agency assumes that car companies will use additional means (e.g. earning credits by introducing small numbers of electric vehicles and improving air-conditioning technology, or even paying fines) to reach the appropriate goals. 

So, while automakers exceeded expectations in model-year 2012, they still failed to meet the CAFE target of 30.1 mpg. And in 2013, car companies hit 28.9 mpg, but that fell significantly short of the CAFE target of 31.1 mpg.  

Is it bad news that automakers failed to meet their true goals? Or is it good news that automakers exceeded low expectations? We'll let you decide. 


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