Consumer group says new CAFE standards would save car buyers money from day one

Source: Julia Pyper • E&E  • Posted: Wednesday, January 18, 2012

Ahead of three public hearings on the Obama administration’s new fuel economy standards, the Consumer Federation of America (CFA) released a report yesterday that found higher standards will have immediate benefits for drivers’ pocketbooks.

The new corporate average fuel economy (CAFE) standards require a fleetwide average of 54.5 mpg by model year 2025. CFA’s new research shows that a buyer with a five-year loan on a car that complies with the 2025 standard would start saving money in the first month.

Savings on gasoline spending will outstrip the monthly cost of fuel-efficient technology from the start, said Mark Cooper, director of research with CFA, in a media conference co-hosted by the nonprofit group Consumer Reports.

By the time the five-year loan ends, Cooper calculated, the consumer will have saved an average of about $800. By the 10th year of ownership, assuming the price of gasoline stays about what it is today, the vehicle would generate an estimated $3,000 in consumer savings, most of which would go to the original owner.

“This is a consumer program,” said Cooper. “No doubt about it.”

The report comes days ahead of U.S. EPA and the National Highway Traffic Safety Administration’s (NHTSA) three public hearings on the standards set to begin next week in Detroit, Philadelphia and San Francisco.

Polls show public support

CFA argues that the upgraded fuel efficiency standard is coming at the right time. Gas prices hit a record high in 2011, averaging $3.53 per gallon and putting consumers in a vulnerable position. Last year, gasoline expenditures were 40 percent higher than the cost of home energy and surpassed vehicle ownership as the biggest cost component of driving, according to the CFA report.

Rising gasoline prices have changed the cost structure of driving, making it all the more important to advance fuel economy and reduce gasoline consumption, said Cooper. Furthermore, “every drop of oil we don’t consume and don’t import is good for national security,” he said.

Setting the new standard 15 years in advance also leaves enough time for the auto industry to adapt its designs, said David Champion, director of the auto test division with Consumer Reports. Fuel economy has already improved 17 to 18 percent over the last decade, he said, so while 54.5 mpg by 2025 is a strong target, it’s achievable.

What’s more, people seem to want it. A Consumer Reports poll from last November found that 93 percent of those surveyed were in favor of stricter fuel-economy standards and 77 percent agree the government should increase and enforce them.

The issue also crosses party lines. A survey by CFA last May found that more than three-fifths of Republicans and Democrats think federal requirements to increase fuel economy are an important step in reducing oil consumption.

Auto dealers remain opposed

The strong CAFE standards have broad support from consumer groups, environmentalists, labor unions and even a lot of automakers. According to the CFA report, the only real opposition comes from auto dealers, “who are fearful of losing the profits they made from older, fuel inefficient vehicles.”

Bailey Wood, spokesman for the National Automobile Dealers Association (NADA), says that when it comes to selling cars versus SUVs, however, the profit margins are within a couple of percentage points.

Wood also says he’s skeptical of consumer group surveys because they don’t account for different types of vehicles, miles driven and other factors that influence costs and benefits. Savings calculations also overlook the fact that 20 percent of new cars are leased, said Wood. The people who lease cars will never see the savings of fuel economy returned to them because they don’t drive the car long enough to reap the benefits, he said.

“As soon as people start realizing these things have a real and substantial cost to them, I think the perspectives will change.”

The group Consumer Watchdog also raised the issue in a letter to the White House this week that consumers might not get the fuel savings they expect from their new vehicles due to discrepancies between tested and actual mileage. A 54.5 mpg certification doesn’t mean the vehicle will get 54.5 mpg on the road.

A 40 mpg SUV?

A town hall-style telephone conference last night led by national security, business and consumer groups revealed that many Americans are hurting at the pump and that they’re keen to see greater fuel efficiency.

“Consumers are very hungry for more fuel-efficient vehicles and alternative-fuel vehicles,” said Champion of Consumer Reports.

Automakers are already responding to that demand. Just this week at the North American International Auto Show in Detroit, Volkswagen introduced the Jetta Hybrid, Mercedes-Benz introduced the E300 Hybrid and BMW introduced the ActiveHybrid 5.

The future of fuel efficiency doesn’t only rely on hybrids, either. Improved gasoline-engine vehicles can get up to the target levels, said Champion, adding competition to the market. Even SUVs and light trucks — like the Ford F-150 EcoBoost V6 — are becoming more fuel-efficient.

“People love their SUVs,” added CFA’s Cooper. “And they’ll love them when they get 40 mpg.”