The magic number is 54.5: That’s the target the government and automakers have agreed upon for the average fuel economy of new cars and light trucks by 2025.
The updated Corporate Average Fuel Economy (CAFÉ) standards, signed into law in 2011 by President Obama, reflect a whopping 99% increase to the earlier standard of 27.3 miles per gallon (mpg). While that sounds like a big leap (and it is), keep in mind that this is an average across all light-duty vehicles. Each manufacturer has its own target based upon the sales makeup of its vehicle lineup—economy cars vs. SUVs—and a lot of flexibility in how to meet that target.
And while most of the focus is on the fuel-economy side of CAFÉ standards, overseen by the National Highway Traffic Safety Administration (NHTSA), there are complementary greenhouse-gas-emission targets for automakers as well, which are overseen by the Environmental Protection Agency (EPA). The regulations are closely related because the best way to reduce carbon dioxide is to burn less fuel, according to Jeff Jowett, a Detroit-based automotive analyst for IHS Automotive.
Jowett says automakers are taking two main paths to the improvement of vehicle fuel economy—light-weighting the vehicles, or trying to lower their overall weight—and installing smaller, turbocharged engines.
“You can do that both by [adding] technology to the engine and also by offering a lighter vehicle,” he says. “Then you don’t need as big of an engine, so that helps you in multiple ways.”
For its 2015 model year, the Ford F-150 was engineered for the first time with a lighter-weight aluminum body instead of steel. The switch helped trim up to 700 pounds from the truck’s weight, which in turn boosted its fuel economy by up to 20%, according to the automaker.
While one supposed rule of thumb is that every 10% drop in vehicle weight provides a 5% boost in fuel economy, Jowett says the calculation is not that simple. “If you’re going to take weight out of a vehicle, you’re usually going to combine that with a powertrain action, or many different powertrain actions,” he says. “It’s hard to say how much fuel efficiency you can get from taking a pound of weight out, because it never happens by itself.”
Also, there are adjustments that would help automakers hit their greenhouse-gas-emission target—improving the air-conditioning system, installing LED lighting—that do not necessarily affect fuel economy.
Beyond light-weighting and making smaller engines—the first and most cost-efficient ways to increase fuel economy—automakers are trying to hit CAFÉ targets differently. Toyota and Ford are committed to hybrid technology, for example, while Volkswagen is pursuing diesel engines, which are more fuel-efficient than gasoline-powered models.
“[In] individual technologies, that’s where you start to see the different paths manufacturers are taking just because of the expertise they have … [and] the capacity they have in their plants to produce various types of powertrains,” says Jowett.
And at this stage, automakers do not have a one-size-fits all solution.
“There’s definitely not just one technology that is going to win out,” says Jowett. “In 2025, you won’t walk into a showroom and see all diesels, all hybrids, or all aluminum vehicles. … It won’t be easy to meet, and fuel prices are definitely not helping. But there are a lot of good technologies out there that can help solve the puzzle for manufacturers to get there.”
CONTINUED: Meeting the Targets on Time
Engineering more fuel-efficient, less-greenhouse-gas-intensive vehicles that consumers will want to buy is really the key to meeting the targets on time. When gas prices are at multi-year lows, making the sale definitely becomes more complex.
According to the most recent data from WardsAuto, EVs and plug-in hybrids lost market share to conventional vehicles in November 2014. Meanwhile, the average fuel-economy rating for new light-duty vehicles sold that month posted its first year-over-year decline in four years.
Separately, the University of Michigan’s Transportation Research Institute (UMTRI), Ann Arbor, Mich., which tracks average vehicle fuel economy, reported that this average stalled at 25.3 mpg for September, October and November after several consecutive months of increases, then fell for the first time in December.
According to Michael Sivak, research professor at UMTRI, the stall and drop “likely reflect the large and continuing decreases in the price of gasoline. Despite these reductions, vehicle fuel economy is up 5.0 mpg since October 2007.”
This has led some to wonder whether the government will reconsider its 2025 targets during a midterm review of CAFÉ regulations in 2017.
While acknowledging that low gas prices and increased sales of less-efficient vehicles will definitely make it harder for automakers to hit the targets, Jowett of IHS does not believe they will persuade the government to reconsider the standards.
“Their whole goal is to reduce dependence on foreign oil and improve overall efficiency,” he says. “They will just look to the manufacturers: ‘We know it’s going to be harder for you, we’re all enjoying the cheaper gas prices, but that’s not going to change.’ ”
Beyond NHTSA, EPA and automakers, several other players are involved in the CAFÉ targets, according to Jowett. The state of California and its own vehicle emissions standards are intertwined with federal targets. That’s because in 2009, the EPA granted California a waiver to enact its own greenhouse-gas-emission standards, which were tougher than the national standards. Later, the EPA, NHTSA and California worked together to establish new fuel economy and emissions standards for the nation that the state could also adopt, so automakers would not have two different targets to meet.
“As an entire group, one of the goals was to make sure California was … happy with the direction of the rest of the country so you could have just one set of harmonized regulations,” says Jowett. “If they ever feel the rest of the country is not going far or fast enough, they can always raise the limits to what they feel is necessary for their state.”
Thirteen other states have adopted California’s Clean Car standards, representing about one-quarter of the U.S. vehicle fleet and vehicle miles traveled. These are led by New York, Pennsylvania and New Jersey. “Even if the government were to say they will lower these [targets], there’s always the risk that California will say, ‘We will not,’ ” says Jowett. “There are a lot of pieces to this puzzle, and it’s very intertwined.”
Then there is the fact that automakers have already placed their long-term bets on the best way to meet their CAFÉ targets, and they believe the low gas prices are a temporary anomaly. Or, as Ford CEO Mark Shields said in December, “We [believe] the price of oil will continue to go up. We’ve ratcheted [our near-term forecast] down in light of the recent dynamics, but our point of view is still that the cost of a gallon of gas is going to go up over time, so it doesn’t change our plan.”
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