Obama's Sweeping Changes for America's Cars

The usual practice in Washington is to issue marginal new rules and declare them revolutionary. President Obama’s new fuel-economy standards for automobiles, by contrast, may be even more sweeping than Obama himself acknowledges.

The president’s goal is to improve America’s collective gas mileage, cut emissions of carbon dioxide and other greenhouse gases, and reduce U.S. imports of foreign oil. To do that, Obama aims to limit the amount of tailpipe emissions cars can spew, the first such federal regulation. And he’ll raise gas-mileage standards by 40 percent, basically accelerating new rules put in place during the Bush administration. Those rules were considered aggressive when passed in 2007, but now Obama will bring them into effect four years sooner. It’s an “epoch-changer,” says Jack Nerad of car-research site kbb.com. “It will markedly change what Americans drive.” Here’s how:

Cars will cost more. Raising fuel economy so quickly will force automakers to fast-track new technology that might otherwise evolve over years or decades. That will be expensive. The new rules start to get phased in for the 2011 model year, which will include many cars appearing in showrooms in 2010. By the time the rules are fully implemented for the 2016 model year, the auto industry estimates that meeting the new requirements could add $1,300 to the cost of a car. The industry has overstated such estimates in the past, yet even environmentalists who have pushed for the changes expect car prices to increase $1,100 or so by 2015.

The price increase will probably be less for cheap cars and more for luxury models. On a typically priced $25,000 car, the hike could amount to an extra $25 per month or so over the course of a 5-year loan.

Mileage will be better—on virtually all cars. The new rules will directly mandate higher fuel economy. For passenger cars introduced as 2016 models, fleetwide mileage must be 39 miles per gallon or better. SUVs and pickup-truck fleets must average 30 mpg. Combined, that’s an average of 35 mpg for all cars in an automakers’ lineup.

In the past, required mileage increases have been structured in a way that allowed automakers to offset low mileage vehicles like SUVs by building lots of higher-mileage economy cars, even if they were unpopular and the manufacturers took a loss on them. That’s one reason the Detroit automakers became overreliant on big vehicles. But the new rules will be different, and will basically require every vehicle category to become more efficient. The details aren’t yet final, but an SUV that currently averages 16 mpg may have to average 19 or 20 mpg by 2015. A minivan averaging 19 mpg now may have to get 23 or 24 mpg. A small runabout getting 30 mpg may be required to average 36 or 37 mpg by 2015.

Fillups will cost less. Drivers will save money at the pump. If gas costs $2.50 per gallon, for instance, the typical driver of a Honda (HMC) Accord with a four-cylinder engine would spend about $1,250 to drive 12,000 miles in a year. If the Accord got 40 percent better mileage, the same driver would spend about $890 on gas each year, an annual savings of $360. “They day you drive off the lot you’re going to start saving money on gas,” says David Friedman of the Union of Concerned Scientists, which favors the new rules. “Prices will be higher, but savings will be higher too.”

The only caveat is that gas prices could be a lot higher than $2.50 or even $3.50 per gallon by 2015. Some analysts and industry officials think $5 or $6 gas is plausible within a decade. If that happens, obviously consumers won’t be saving money on gas, they’ll be paying more. But they’ll probably be thankful to have more efficient cars in the driveway.

Some states will face much tougher rules. To get the automakers to sign up for the new rules, the Obama administration cut a deal with California, which for years has enforced emissions rules that effectively require cars sold in California to get better mileage than those sold elsewhere. The Golden State (and 13 other states that have adopted its standards) will now abide by the national rules. That’s a huge break for the automakers, since they’ll be able to build cars that meet a single set of standards, instead of tailoring vehicles to a patchwork of different rules.

In the 14 states that abide by the California standards, forthcoming changes will seem relatively gradual as the new rules start to go into effect in 2010. But in the 36 other states, dealers may start selling cars built to meet rules that are suddenly a lot tougher—which means price hikes could be more severe. Buyers in those states may need to strategize about how to get the best deal, once it’s clearer how the manufacturers plan to deal with the discrepancy. (The “California states” already abiding by tough emissions rules include Arizona, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington, plus the District of Columbia. The other states are the ones that may see unusually large price hikes.)

There will be a lot of new technology under the hood. Just when you thought you understood how fuel injectors work, you’ll have to start understanding direct injection, dual clutches, continuously variable transmissions, and other technologies that automakers will use to squeeze an extra mile or two or three from a gallon of gas. Many of these systems would have arrived over time, but now they’re likely to be rushed into development—one big reason car prices are likely to rise. Most car buyers won’t need to understand exactly how the new technology works, but they will have to educate themselves about what’s worth paying for, especially in the early stages of the rollout, when newer systems are still likely to be optional.

Many people will drive very different cars. Manufacturers will have to come up with lots of newfangled vehicles to meet the new standards, which means more hybrids in every category and price range, more “clean diesels” like those being introduced by European automakers such as Volkswagen and Mercedes, faster development of mass-market electric-powered cars like the forthcoming Chevy Volt, and probably some innovations that haven’t entered the mainstream imagination yet.

Hybrids, for instance, won’t just be a marginal part of an automaker’s lineup, reserved for environmentalists. There will be hybrid minivans, crossovers and SUVs, and automakers will have to sell enough of them to get volumes up and costs down. Friedman estimates that hybrids could constitute 20 percent of the entire U.S. fleet by 2020, a much higher proportion than we’d see without the new rules.

And some vehicles will stay more or less the same. The Obama administration insists that its new rules won’t drive pickups and SUVs onto the endangered species list, and that car buyers will have all the choices in 10 years that they have now. That may turn out to be true, but it’s also a lot less likely that an 8-passenger SUV a decade from now will be powered by a huge V-8 engine. Instead, it might be powered by a turbocharged V-6 that still has plenty of power but maybe offers less towing capability. A typical family sedan will probably be powered by a high-output four-cylinder engine instead of a V-6, and so on down the line.

Disclosure: no positions

Comments

[pk de cville:]

"The only caveat is that gas prices could be a lot higher than $2.50 or even $3.50 per gallon by 2015. Some analysts and industry officials think $5 or $6 gas is plausible within a decade. If that happens, obviously consumers won’t be saving money on gas, they’ll be paying more."

Math Quiz:
Does John save more (driving 12000 miles per year) when gas costs $2.50 or $5 per gallon?

12000/40 = 300 gals bought per year
300 gals x 2.50 = $750 cost of gas
300 gals x 5 = $1500 cost of gas

12000/25 = 480 gals bought per year
480 gals x 2.50 = $1200 cost of gas
480 gals x 5 = $2400 cost of gas

Savings when gas costs $2.50 = $450
Savings when gas costs $5.00 = $900

May 20 05:07 AM

[Tdot:]

Anyone got any bets placed on how long it will be before California and the other random "rogue states" up the ante again by unilaterally regulating even higher corporate fleet fuel efficiency and reduced carbon emissions in order to sell vehicles in the state, thus eventually forcing even higher federal regulations? The tail has again successfully wagged the dog.

May 20 07:13 AM

[Roger.Sharp:]

One sure, easy way to reduce fuel consumption is to have smaller engines. Horsepower has increased constantly over the years and so have power/weight ratios. If cars were operating at 90% of their maximum power at 80 mph we would see a considerable reduction immediatly. However, available acceleration would be much less and the auto magazine journalists would be very rude about them.

May 20 08:04 AM

[john s. gordon:]

well television advertising emphasizes irresponsible driving and pavement ripping.
nobody needs a 600 hp automobile.
continuously variable transmission - van doorn's automobilfabrik in the netherlands was selling cars with them in the early 1960's. (they were later bought up by volvo.) of course you can do that in holland because the terrain is flat.
> jack

May 20 08:54 AM

[TCK:]

The whole debate is just a "red herring " for an attack on individualism and to promote a social agenda. Politicians will not be happy until we are all standing in line at the bus stop like good little drones.

Also, this is no substitute for a viable energy policy. If every American stopped all driving tomorrow, United States would still need to import oil !

May 20 09:35 AM

[Midas1:]

Toyota has received 80,000 orders for the new Prius. Why couldn't it have been GM or Ford? Wake up domestics and get a decent small hybrid car on the road. Toyota is lightyears ahead of you.


On May 20 05:05 AM Freya wrote:

> The new Toyota Prius is rated at 50 mpg highway. It will be sold
> here shortly.

May 20 09:52 AM

[scfranklin94:]

So I should buy a Porsche Turbo now before it gets legislated out of existence...

May 20 09:52 AM

[La Marque:]

I agree with the author on most points, but...
I see inflation, a lot of inflation, swallowing all the so-called savings. I also see American manufacturers shrinking more or just plan disappearing.

May 20 10:46 AM

[Speedzzter:]

Dreamkilling Barack Obama may have conducted his propaganda photo op announcing the death of automotive liberty in America in the White House Rose Garden, but it's a different kind of flower that will proliferate under the 42 M.P.G. automobile Corporate Average Fuel Economy standard: FUNERAL FLOWERS.

* * * *
Of course, it doesn't take a Harvard-trained physicist to figure out that: (a) weight and fuel economy are inextricably linked; and (b) smaller and lighter loses out every time to bigger and heavier. The pre-Obama CAFE was a proven killer. Now the Obamanator and the "Governator" have just made it even worse.

However, the mere mention of hiked fuel economy standards and more "hamburger on the highway" was enough to cause the granola-eating, all-natural-fiber high priests of the environmental left to kowtow Obama into sacking his initial nominee to lead the National Highway Traffic Safety Administration,Charles "Chuck" Hurley.

(However, sporting motorists were hardly sorry to see "MADD Chuck" go, given that he was poised to be the Obama Administration's stalking horse for a return of the 55 m.p.h. national speed limit)

FoMoCo's face of appliance motoring (other than William Clay Ford, Jr.), Vice President for Environment and Safety, Sue Cischke weighed in with the obvious:

When regulations establish requirements on what people buy, not what we make, if people aren't buying those, we have to offer incentives . . .We can't force people to buy what they don't want to buy.

We already know FoMoCo's favorite incentive is a draconian federal fuel tax . . .

Cischke also gave a clue about the butchering up of the next generation Mustang:

"Though it'll be expensive, Ford's Cischke says, a lighter car can be made as safe as a heavier car."

Even before the new regulation, Ford Motor was planning on 'taking between 250 and 750 pounds from (each of) our vehicles. That's a huge challenge,' she says."

"'It's all about managing the energy, protecting the crash cage,' she says. 'There are ways you can design a vehicle to be very strong, to provide the same crash safety as a heavier one.'"

Although anyone familiar with NASCAR racing knows that a "cage" can provide remarkable strength-to-weight and protection, the cost and the inconvenience is enormous. Thus, "taking between 250 and 750 pounds" out of the Mustang without using cost prohibitive methods, such as aluminum unibodies and carbon fiber, while at the same time beefing up the "cage" MEANS DOWNSIZING, CANNING THE V8s, AND FRONT WHEEL DRIVE.

If that happens, most Mustangers probably won't care if the ObamaMobile FWD "Mustang IIs" aren't as safe, because they'll be so depressed at the death of the "real" Mustang (V8 & RWD) that they'll WISH THEY WERE ALREADY DEAD!

Across-the-board downsizing is virtually a certainty in the lower-priced ranks because it does no good to build rolling high-tech fortresses of carbon fiber, magnesium, aluminum and dozens of airbags if regular wage earners cannot afford to buy them.

The $1,300.00-per-vehicle average price "tax" that will be extracted from new vehicle buyers to cover the fuel economy technology doesn't take into account the hidden costs of the Obamanator CAFE hike, such as higher insurance premiums that will be required to cover increased personal injury payouts, lost productivity, and manifold pain and suffering that will occur when the ObamaMobile hybrid minicars collide with working trucks or vintage vehicles that survive the Billy Ford and the Democrats' war on historic vehicles (a/k/a "Cash for Clunkers").

But as the highway carnage inevitably rises with the downsizing of the fleet, the radical Obamamaniacs and the freedom-hating EnviroNazis will certainly be waiting in the wings with the final piece of 1970s greeniac nostalgia: The federal 55 m.p.h. speed limit.

May 20 10:47 AM

[fireball:]

guess i better get to it, looking for my road ripper, too. one of my few childish indugences.
i don't need help in deciding what i drive, what i shoot or how much money is fair. i will choose for myself if i can afford it.


On May 20 09:52 AM scfranklin94 wrote:

> So I should buy a Porsche Turbo now before it gets legislated out
> of existence...

May 20 11:52 AM

[slowdown:]

Yeah...the last one was supposed to get 60 and my nephew sucked into the con. He get's 40 and will be dealing with replacing a $4500. battery soon.


On May 20 05:05 AM Freya wrote:

> The new Toyota Prius is rated at 50 mpg highway. It will be sold
> here shortly.

May 20 11:59 AM

[slowdown:]

Yeah...good luck with that....my commute is already long enough (just over an hour) and nobody's forcing me to reduce my speed by 20 mph.

On May 20 10:47 AM Speedzzter wrote:

>Fuel
> Economy standard: FUNERAL FLOWERS.
>
> will certainly be waiting in the wings with the final piece of 1970s
> greeniac nostalgia: The federal 55 m.p.h. speed limit.

May 20 12:19 PM

[babyray:]

I am for anything that will save American blue collar jobs and stick it to the greedy wall street bankers that got us into this economic mess!!!!

May 20 12:42 PM

[FDNY RET:]

I've been driving a 96 VW Passat TDI 5pass, 4dr sedan now for 177,000miles. Comfortable, plenty of power and always got 45+ MPG. If I "sensitive" drive it I'll get over 50mpg.
There are others in Europe that get 80mpg-for years now!!
The only people that buy Buicks are Chinese.
Most Americans buy what they like to be "seen in"!, any pay for the privilege like a woman wears clothes.

May 20 02:36 PM

[harammph:]

Slowdown, what's the Lemon Rate for US automakers?

All of these Must Have Electronics are giving headaches to everyone.

May 20 04:12 PM

[Gil 1937:]

If gas costs $2.50/gallon and I drive 12.000 miles/yr I will pay tax on say 300 gallons. I may decide to drive 24,000 miles/yr as long as the gas stays at $2.50. If gas goes to $5.00/gallon I may decide to drive 12,000miles/yr but more probably will reduce my miles to say 6,000/yr. Unless the tax has doubled, the tax will be increased. If the cost increased due to oil then look out for much more than a double of tax/gallon. My point: less gallons used, means less tax. Unless more miles are driven, less tax. Do you believe the government will accept less tax-no way. Gil

May 20 05:13 PM

[Tony Petroski:]

Well put Speedzzter. We are replaying the decade of the '70's with double nickles on the way, Ben Stiller playing the Burt Reynolds role in new "Smoky and the Bandit" movies and Obama vying with Jimmy Carter for the title "Worst President since Andrew Johnson."

May 20 08:01 PM

[carey_jim:]

Natural gas.
Nuclear energy.

May 21 12:42 AM

[Windsun33:]

Haha.. yeah, OK.

In case you have not noticed, the Prius is made almost 100% in Japan.

On May 20 12:42 PM babyray wrote:

> I am for anything that will save American blue collar jobs and stick
> it to the greedy wall street bankers that got us into this economic
> mess!!!!

May 23 09:21 PM