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Could the proposed standards lead to automakers vacating smaller platforms?

The proposed CAFE standards that have been looming all year will force some major changes on the automotive market. The government says that the much more stringent fuel economy standard will save consumers at the pump and reduce the national need for foreign oil. The auto industry has said that the cost of meeting the standard would increase the cost of new vehicles and could result in lost jobs.
According to a new study published by the University of Michigan, the CAFE standards will make cars larger, not smaller. The study indicates that there is a loophole in the economy standards that the automakers could exploit.
"For just about all the scenarios, the car got bigger,” said Steven Skerlos, an associate professor at U-M Department of Mechanical Engineering. “What you can model in a computer is different from reality, but based on this research we expect it to happen."
The loophole is that the formula used for determining miles per gallons required under the new standard uses the vehicles footprint (multiplying the wheelbase by track width). This was done to give larger vehicles less stringent economy standards to follow. In a nutshell, the formula favors larger vehicles and those vehicles may be less costly since they wouldn't have to use as much technology for fuel gains. 
Therefore, automakers may design new vehicles to be larger in an effort to target the lower economy standards. The study also claims that not only would the automakers considering redesigning a vehicle to go for the lower economy limits undermine the CAFE standard goals, but it would also create more pollution
"This study illustrates that there may be a substantial financial incentive to produce larger vehicles, and that it can undermine the goals of the policy," said Kate Whitefoot, who conducted the research as a U-M design science doctoral student and is now a senior program officer at the National Academy of Engineering.

Source: AutoNews

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RE: Another government regulation backfiring?
By sigmatau on 12/14/2011 8:42:48 PM , Rating: -1
LOL whatever.

Not even sure what you are arguing. What exactly is the big bad old government hiding? CAFE was designed to increase our fleets' fuel economy while at the same time attempting to be competitive with Europe and Japan. There are multiple benefits to CAFE, but if you can't see past the first page of a 50 page document, all of that is lost to you.

CAFE does increase initial costs of cars but also reduces the total cost of ownership of that same car. Let's say you spend an extra $1000 on a brand new car because of big bad old CAFE. You will save over $1000 over the course of a few years due to the fuel savings of that car.

I am still waiting for a thoughtful response to why CAFE is bad.

RE: Another government regulation backfiring?
By Keeir on 12/15/2011 3:36:51 PM , Rating: 3
The question is not "How is CAFE bad?"

but rather "How is CAFE good?" or "Is CAFE better than the alternatives?"

Any regulation is fundamentally "bad". Now the regulation can accomplish overall good, but it starts negative, not positive.

If the end goal is to increase fuel economy, then increase the cost of gasoline. Consumers will put pressure on manufacturers to produce fuel efficient cars, at the rate they value it. Government revenue will increase (regardless of your political view, US revenue MUST increase and spending MUST decrease), and Government will have no burden of compliance costs.

CAFE ensures the Government is in the business of designing special tests, collecting data, assesing data, levying fines, holding hearings on the fines, etc, etc. Overall end cost to the government is much much higher with CAFE.

But why is CAFE bad?
Well, CAFE forces manufacturers to force consumers to buy fuel efficient cars. Manufacturers ALREADY have fuel efficient cars they could offer. The US marketplace DOES NOT WANT them. Recent studies have shown most US consumers (more than 50%) require fuel savings to pay off increases in initial cost in less than 36 months. Given that over 3 year the average US driver pays ~6,000 in fuel costs, and even a 50%! savings in fuel justifies only a 3-4,000 increase in initial purchase price.

So given the above, CAFE forces manufacturers to force you (average US consumer) to purchase cars than you do not see as a good value. And you get to blame the manufacturers for the higher prices of the cars you want to buy and the cheapness of the cars you can afford to buy. Stupid.

If we (the US consumers) really want more efficient cars... simply refuse to purchase less efficient cars! No need for CAFE OR Gas Taxes. But we are all too selfish for this... so we need something to force us to act in the way we apparently want to act... lets at least do it efficiently.

By Lerianis on 12/18/2011 9:46:42 PM , Rating: 2
With all due respect, I disagree about 'U.S. revenue must increase and spending must decrease.' Why?

Because the fact is that compared to what we spent years ago with less people in America (meaning less wear and tear on the road and other things) we are already spending TOO LITTLE and not taking in enough revenue.

Hell, in the 1970's, federal and state combined, we took in 25% of GDP. Today? 18.6% with nearly 2 times the people!

The real issue is that government isn't taxing enough and isn't taxing the right people, meaning the rich people and corporations that outsource overseas.

By Mint on 12/20/2011 12:15:52 PM , Rating: 2
It can pay off immediately if you lease. $3000 over 3 years works out to $80/mo, which is a lot. Put another way, if a car has a 60% residual after three years, then $3000 saved per year means break even occurs with a $7500 greater capital cost (assuming 0% interest, so reduce that however you see fit).

The thing holding back batteries and PHEV from being cost competitive today is not initial cost, but battery life and inventive financing. Imagine if, 10 years down the road (say 3000 charges), a battery can still function at 90% capacity. The value of the battery is still very high, and does not depreciate nearly as fast as the rest of the car. You can, for example, remove 90% of that battery and put them in a new car while running the old one as a regular hybrid until it's retired.

By lightfoot on 12/15/2011 3:52:24 PM , Rating: 2
I am still waiting for a thoughtful response to why CAFE is bad.

Shane wrote this really great article titled "Study Claims CAFE Loopholes Will Make Vehicles Larger, Not Smaller."

It goes into pretty good detail about one of the reasons that CAFE is bad.

The Cliff's Notes version is basically this: CAFE was designed to reduce fuel consumption and emissions. Instead it makes vehicles larger and consume more fuel and create more emissions. That is bad. Mmkay?

A fuel tax on the other hand would have EXACTLY the desired results and would not have loopholes because it is so simple. Heck, Europe even tested it for us and proved that it works.

How the Corporate Average Fuel Economy is supposed to work can't even be described in three pages much less three sentences.

A fuel tax makes fuel more expensive. People react by buying, and thus using, less fuel. The money collected by the tax can be invested in technologies that improve fuel efficiency, build better roads, and improve access to transportation to the poor.

CAFE is needlessly complex and irreparably flawed. It is bad legislation and bad government policy.

I am still waiting for a thoughtful response to why CAFE is good.

"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer

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