Ever since it’s inception, the Federal Government’s Corporate Average Fuel Economy standards program has never been far from controversy. With the proposed 35 miles per gallon standard less than a decade away; auto manufacturers are struggling to find ways of meeting these fleet average targets. Because light trucks as well as cars are now included in the targets, domestic automakers like Ford, GM and Chrysler are likely to find the new regulations particularly tough to deal with, since a great deal of their profit still rests on truck production. Now, thanks to a meeting in May, when President Obama called on the EPA and Department of Transportation to included medium and heavy-duty vehicles within the CAFE umbrella (under different and yet undisclosed fuel economy standards), things have become even more messy and complicated.
Recently a 414 page report, issued by The National Academies (a group made up of academics, business leaders, scientists and consultants from the financial, oil and transportation industries) stated that in order for pickups, especially medium-duty ones to meet CAFE targets greater than current fuel economy standards; new technologies will have to be utilized or the automakers risk heavy fines.
Either way, sticker prices could increase by as much as $15,000 per truck once the regulations are enforced. According to Charlie Territo, a spokesperson for the Washington D.C. based Alliance of Automobile Manufacturers, “costs will depend on the specific fuel economy targets and the cost of the technology that needs to be added. What remains to be seen is whether consumers are willing to pay those costs.”
The report cites a number of potential avenues for saving fuel on pickups, including turbocharging and using smaller displacement engines; hybrid drivetrains and more efficient diesel engines, still another, more simpler proposal is raising taxes on the fuel itself. However when it comes to technology the key issue is being able to balance more fuel efficient drivetrains with weight savings, especially difficult considering the amount of safety equipment is now mandated by the Feds on modern vehicles.
Whatever the proposed medium and heavy-duty CAFE requirements end up being, you can bet that they will likely hurt small business and contractors, those that currently rely on medium and heavy-duty pickups and represent the largest segment of buyers in this market. And to make matters worse, much of America’s wealth is built on small businesses, the kind that use pickups. So while the CAFE regulations might have had good intentions – reducing greenhouse gases and oil dependence, at this juncture, given the targets already outlined, the economic effects are likely to be disastrous in an already depressed business environment, unless significant changes to the CAFE standards that include more realistic short term targets are added.