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6 Ways New CAFE Standards Could Affect You

More Costly Cars, but Greater Savings on Fuel

Federal regulators officially unveiled the Corporate Average Fuel Economy (CAFE) proposal for the 2017-'25 period on November 16, after months of behind-the-scenes rule-making. It's a complex bundle of regulations that would have profound effects on car buyers across the nation.

There are no big consumer surprises in the proposed new 2025 CAFE standards. As already announced, the government wants automakers to build more efficient passenger vehicles that average the equivalent of 54.5 mpg, and get it done by 2025. The proposal estimates that the technologies needed to achieve that standard will add $2,000 to a 2025 model-year vehicle. It also estimates that fuel cost savings will more than offset that additional expense over the life of the vehicle.

The provisions of the nearly 900-page "Notice of Proposed Rule-Making" also would have broad repercussions for highway safety and the costs of buying, insuring and operating a new car or truck. The rules also could affect the cost of fuel and even the vehicles that are available on new-car dealers' lots.

Higher-mileage cars, such as the Chevrolet Volt, Fiat 500, Hyundai Elantra, Kia Optima Hybrid and Volkswagen Jetta TDI are the goal of increasingly stringent CAFE standards.

Chevrolet Volt, Kia Optima Hybrid, Volkswagen Jetta TDI, Hyundai Elantra and Fiat 500.

The White House, major automakers and regulators including the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) agreed to the CAFE plan in principle in July 2011. Now, with the formal introduction of the rule-making proposal, the process will be opened to the public. EPA and NHTSA will take public comment through mid-January before drafting a final 2017-'25 CAFE program, due to be adopted by July 2012.

Major changes aren't likely to be made, though, so rather than waiting eight months, we pored over the proposed rules to identify how the 2017-'25 CAFE standards could affect consumers. One much talked-about aspect — the 54.5 mpg standard — is far higher than the number that the vast majority of new-car buyers will see on window stickers in the 2025 model year.

That's because the CAFE is a government measuring stick that has not changed over the past 33 years, despite changes in testing procedures that have made the EPA window sticker number more closely reflect the actual fuel economy consumers can expect from their vehicles.

Additionally, automakers can use a variety of credits and exemptions to reduce the actual fuel economy that their vehicles would need to deliver in order to achieve the equivalent of a fleet-wide average of 54.5 mpg under CAFE rules. For consumers, the "real" average fuel economy figure for the 2025 model year will be an EPA window sticker number that's closer to 36 mpg.

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In fact, there may not even be an individual vehicle model that's required to get exactly 54.5 mpg even under the CAFE measuring system. That's because that number is the average expected of all models from all manufacturers. Individual models will be assigned fuel-efficiency targets based on their "footprints," which is the square footage of the area between the spots where their tires hit the ground. The larger the footprint, the less stringent the fuel economy target. That detail makes it a bit easier for companies that are heavily dependent on big cars and trucks to go on making them.

The agencies provided some sample targets for actual vehicles, using 2012 model-year cars and trucks and assuming they'll still have the same footprint in 2025. The car targets range from 61.1 mpg for a Honda Fit down to 48 mpg for a Chrysler 300. Among trucks, the target for a four-wheel-drive Ford Escape would be 47.5 mpg. A Chevrolet Silverado pickup would have to achieve 33 mpg.

Here are five more ways the proposed 2025 fuel economy rules will affect consumers:

1. Cost of buying new cars and trucks.

Prices of new cars are certain to climb because of the cost of the new technologies needed to comply with the CAFE rules. Those technologies include everything from turbochargers and new generations of multispeed automatic transmissions to battery-electric powertrains. NHTSA and EPA have estimated that the average new car will cost $2,000 extra by 2025 because of the proposed new fuel-efficiency standards. They also estimate that savings from improved fuel efficiency would pay that back in just under four years, provided the consumer paid cash for the car. The agencies estimate total savings over a 2025 model-year vehicle's 10-year lifetime at $3,200-$4,600, depending on inflation rates. All those figures presume that gasoline remains at $3.50 a gallon. Higher fuel prices would increase the savings. Falling gas prices would reduce them.

2. Choice at the dealership.

The kinds of vehicles that will be available in 2025 will most likely be the same kinds available now — but with shifts in proportion. There will likely be more hybrids to choose among, but fewer trucks. To hit the 2025 fuel-efficiency goals, automakers will likely increase the proportion of conventional and plug-in hybrids, electric cars and smaller gas and diesel vehicles in their lineups. The addition of electric powertrains and reduction of vehicle size and weight have big paybacks in terms of improving fuel efficiency.

There also are provisions in the rules to promote increased use of vehicles running on compressed natural gas. Look for more diesels and smaller gasoline engines — turbocharged V6s instead of V8s, and three- and four-cylinder engines instead of V6s. There probably will be fewer large SUVs and pickups in the later years of the plan. That's because their fuel-efficiency targets increase in the last years of the proposal, making it more difficult and more expensive for automakers to hit them. Big vehicles won't disappear, but there could be two classes of trucks and SUVs: one made up of rugged, conventionally powered models for those who really need work trucks, and the other composed of hybrid models for those who like driving trucks but don't need to haul heavy loads or pull big trailers.

Almost all cars and trucks will have new features related to fuel efficiency. On the list you'll find such things as electric air-conditioning, electric power steering and electric braking. There will be seven-, eight- and nine-speed transmissions. Automated grille shutters will close down at high speed for improved aerodynamics. There will even be instrument panels that include fuel-efficiency "coaching" systems, like colored lights that indicate when the vehicle is being driven in the most — or least — efficient manner. Some of these features are already finding their way into cars.

3. Vehicle operating costs.

Insurance costs could rise, both because of the increased cost of cars and the anticipated hike in collision repair costs associated with the greater use of the plastics, lightweight alloys and aluminum necessary for lighter, more fuel-efficient vehicles. (Plastics, lightweight alloys and aluminum are all more difficult than steel to repair.) NHTSA estimates that an additional $12-$15 billion will be spent on repairs over the lifespan of the 2017-'25 model-year vehicles.

On the other side of the ledger, fuel costs will decline as miles per gallon increase, saving the average owner as much as $460 a year, assuming the current price of gasoline. Owners of some types of vehicles also will see savings in maintenance and repair costs. Electric motors, for example, have only two moving parts and don't need tune-ups or oil changes. Some of the new fuel-efficiency features, like movable grille shutters and high-efficiency lights, could boost maintenance costs, however. There also are concerns that the new and more efficient direct-injection gas engines that are being developed will have higher maintenance costs.

4. Safety.

The use of weight-saving materials will not only affect repair costs but could make newer vehicles more susceptible to damage in collisions with older, heavier vehicles, especially SUVs and pickups. Their occupants could be at a safety disadvantage.

The process of getting those beefier pre-2017 vehicles off the road could take several decades: 17 years is today's average, so cars and trucks introduced in the 2017-'25 period will be in until the 2035-'42 period at least.

One plus for safety can be found in hybrid cars — at least as far as occupants are concerned. A pair of just-released studies by the Insurance Institute for Highway Safety shows that injury risk to occupants of hybrids in crashes is lower than it is for occupants of conventional powertrain vehicles. That's due largely to the fact that hybrids are 10 percent heavier, thanks to their batteries and electric drive components. The laws of physics dictate that a bigger, heavier vehicle will push a smaller, lighter one backward on impact.

The second study, however, found that pedestrians are at greater risk of being struck by hybrids running in their quiet all-electric mode than they are by conventionally powered cars whose engines and exhaust systems make noise even at low speeds.

5. Cost and availability of fuel, and the possibility of new taxes to replace lost fuel tax revenue.

Although the rule-making notice doesn't address this specifically, significantly higher fuel economy is likely to increase wear and tear on U.S. roads by reducing the cost of driving while simultaneously reducing the fuel-tax revenue the government collects for highway maintenance.

One scenario holds that as Americans use less gasoline for transportation and the national demand for the stuff drops, so will global oil prices, making gas even cheaper and making it less costly for people to drive more miles. (A countervailing scenario is that demand for oil in growing economies such as China and Latin America will offset any losses from declining U.S. demand, thus keeping fuel prices high and reducing the number of miles driven.)

Another possible impact of increased fuel economy and lower fuel use in the U.S. is a reduction in the number of filling stations. That would mean that consumers in some areas would have to search harder and drive farther to find fuel.

A more important consideration is that declining gas sales mean a further decrease in already inadequate fuel-tax revenue used to pay for road and infrastructure repair and improvement. A September report from the General Accounting Office says that fuel tax revenue is not likely to keep pace with future highway and infrastructure needs.

As more untaxed alternative fuels such as compressed natural gas and electricity are used for transportation, fuel tax revenue falls even farther. All of this is likely to lead to calls for a road tax based on miles driven and not the type of fuel used.

Time To Comment

If you have comments on the proposal, it will soon be time to speak up. NHTSA's CAFE Web site will announce the beginning of a 60-day comment period once the proposed rules — all 893 pages of them — are published in the Federal Register. More details on how to comment also can be found on page 2 of the notice.

NHTSA and the EPA will be scheduling public hearings at various locations to collect public comment. Look for details on NHTSA's Web site.

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