Politicians in the United States and by extension Canada are dreaming of massive, unprecedented gains in fuel efficiency, and if history is any guide, they are not just dreaming, but dreaming in vivid Technicolor.
The story starts with Bloomberg reporting today that the U.S. may require annual fuel-efficiency improvements of 2-7 per cent from 2017 to 2025 for cars and light trucks. This according to the National Highway Traffic Safety Administration.
The NHTSA is evaluating the costs and environmental effects of boosting fuel efficiency in the proposed rule scheduled for publication in September. For model-year 2016, auto makers must have a fleet-wide average of 6.63 litres/100 km or 35.5 miles per gallon. Ottawa has said it will comply with any and all fleet-wide rules in the U.S.
What's next?
The Environmental Protection Agency and California's Air Resources Board are considering rules that would almost double fuel economy to as much as 62 miles per gallon (3.79 litres/100 km) by 2025 models. Annual fuel-economy increases would be as much as six per cent.
Let's put some meat on the bones of these numbers. The 2016 goal is currently met by the all-new and hugely fuel-efficient Hyundai Elantra ($15,849 base). It gets 6.8 litres/100 km in the city.
The 2025 goal is currently met by the Toyota Prius hybrid ($27,800 base) which gets 3.7 litres/100 km in the city.
The point is, auto makers can and do sell vehicles capable of meeting 2016 rules and the 2025 proposed rules. Note, however, that the Prius costs nearly twice as much as the Elantra in today's dollars. If anyone thinks improved fuel economy won't come at increased new car prices, think again.
The obvious next question: Can the auto industry even meet these standards without pricing itself right out of business? No one knows.
We do know, as DesRosiers Automotive Consultants points out in a note to clients, that fuel efficiency in 1982 was 11.6 litres per 100 kilometres and 28 years later fuel efficiency has improved to 9.25 litres per 100 kilometres. That's an improvement of 20 per cent.
DesRosiers asks: "If we have improved fuel efficiency by only 20 per cent over 28 years (and there was a lot of low hanging fruit to be picked during that timeframe) how in the heck are we to improve fuel efficiency by another 28 per cent in six years? It ain't going to happen."
Will a fleet of hybrids do it? Well, currently hybrids account for less than one per cent of new vehicles sales. Draw your own conclusions there. Electric vehicles? In my lifetime they will always be niche vehicles.
"I suppose an OEM (original equipment manufacturer) could just not offer for sale the least fuel efficient vehicles, but that would mean that over 80 per cent of the current vehicles on dealer lots would no longer be offered," adds DesRosiers. "That isn't going to happen either. So this new fuel efficiency standard is bound to fail, pure and simple."
DesRosiers also notes that OEMs have a limited role in meeting the fuel efficiency standard.
"You see, most full line OEMs have vehicles that meet the standard or will meet the standard by 2016," he notes. "But it is the consumer that chooses which vehicle to buy, NOT the OEMs or their dealers. And consumers for the most part are NOT embracing higher fuel standards even with higher gas prices.
"They (consumers) still buy the vehicle they want rather than the vehicle some politician wants them to purchase and their vehicle of choice doesn't meet the new standard. And more importantly there is very little the OEMs can do to make them purchase more fuel efficient vehicles."
Sure, sure, car makers need to develop more fuel efficient vehicles and they are. Witness the Elantra, the Prius, the new Ford Focus and Fiesta, the new Honda Civic, the Chevrolet Cruze and more.
But these smaller cars do not comprise the majority of new vehicles sold in Canada. Indeed, through April of this year light trucks -- pickups, minivans, crossovers and sport-utility vehicles -- accounted for 56.2 per cent of all new vehicles sold in Canada.
So, says DesRosiers, "it will be near impossible for the OEMs to meet these new standards unless consumers change their buying patterns and there isn't a lot of evidence of that happening. And you can pretty well be guaranteed that no politician is going to slap a higher tax on gasoline or force certain vehicles to no longer be sold."
What will happen, then? DesRosiers believes "the industry is heading towards a stalemate where higher standards are imposed and then NOT met. Then the politicians will have a difficult choice: loosen the standard or impose fines on a fragile industry.
"I suspect they will choose to push the standard further and further into the future."
His main conclusion is that politicians should have the courage to set a realistic fleet-wide fuel economy standard "and then let the industry get on with doing their job."
Don't expect posturing politicians to make such a move -- not now and not for the foreseeable future. But the posturing will continue in earnest.
