When it comes to public policy, I don't often agree with the automotive industry in general and Motown in specific. That's because the car biz is ready, willing and lobbying to suck on the federal tit whenever and wherever they can. But when it comes to federal Corporate Fuel Economy (CAFE) regulations, I agree: the system is absurd. As the otherwise deeply misguided GM Car Czar Bob Lutz said, it's like trying to get people to lose weight by forcing manufacturers to sell smaller shirts. Anyway, none of the automakers or their camp followers have the balls to simply call for CAFE's abolition. Instead, they continually work to game, undermine and otherwise manipulate the system to appear to support it. You know; in principle. And now The Wall Street Journal reports that even that's in jeopardy. At a National Highway Traffic Safety Administration (NHTSA) hearing on a new CAFE draft statement, "The auto industry said federal regulators are pushing too far, too fast in their effort to raise fuel-mileage rules [to 35mpg by 2020]. The complaints from the industry, which had previously voiced support for tougher standards, underscore how economic hardship is affecting a major policy debate.they reversing their former support by claiming hardship." It gets worse. According to Automotive News [sub], "The Alliance of Automobile Manufacturers questioned whether the statement was necessary, calling on NHTSA to reserve its right to not draft a statement at all." In other words, can we please torpedo this thing in private, like always? So, anyway, I sent an email to NHTSA.
Find Reviews by Make:
Read all comments
Aren’t the customers applying their own CAFE standards, multiples ahead of the low threshold the auto industry forced the politicians to set down?
This is going to be automakers chasing where customers want to be, not the other way around — for years.
I’ll call for an end to CAFE when Lutz calls for a minimum $2/gallon tax on auto fuel (although it would be better to apply the tax at the wellhead, terminal and mine… but I’ll take whatever I can get).
KixStart–asking for more gasoline tax makes it very hard to follow TTAC’s anti-flaming policy! :)
Supply and demand (including speculative demand) has increased the price of gasoline to $4/gal. This price increase has motivated consumers to drive less and buy more fuel efficient vehicles. No tax increase is necessary. The market has achieved its ends FAR more efficiently than gov’t could.
It would take a committee of 200 people four years at a cost of $250 billion dollars (that you have to pay) to decide how much tax to add. Then the tax would increase (and you would have to pay it). Then the tax money collected gets wasted. 70% goes to “administrative” and “public sector” employee salaries. the other 30% will go to some Al Gore project (where 90% of THAT will be wasted) and to rebuilding roads (where 90% of THAT money will be wasted).
CAFE is handy because oil dependency wise cars last much longer then people buy them for.
I mean now people are worried about $5 gas, but $5 gas is very much a worry in the next 1-2 years, in 10 years (and most cars/trucks can last 10 years+) the worry may be $10 gas.
If people focus on the now, then when the future comes round you get lots of scrapped valueless trucks. Which may sound good for consumer spending, but because of the finance heavy way it is structured, really isn’t. Not to mention that low MPG vehicles now end up taking a hefty bite of the future poor’s income, which further reduces spending (as oil is a rather worthless purchase consumer spending/domestic wealth production wise).
Of course there might be better ways to do this, but it does have a point.
Anyone care to speculate how sh*tty average mpg would be right now if not for the original CAFE standards in the 1980’s?
Yes, the market is trying to force needed changes, but the reality is we (due to politics) won’t let it. We don’t allow the market to correct. Bear Stearns? Didn’t let that fail. Fannie Mae, Freddie Mac? More taxpayer bailouts. Now the dems want to bail out Detroit (can’t win presidency without Michigan I suppose).
My point is, that if we have to be on the hook to bail Detroit out, then could we at least insist that they build somewhat efficient vehicles so that they can sell a few cars?
nicknick right on,gov. waste of our tax dollars has to be addressed soon.
Now now – most of our current tax dollars are being sent over seas to fund our little incursion into Iraq. That’s costing what, around $30+ million a week? Someone has to pay for that right? Tax cuts? Biggest deficit in history? Weakest dollar in how long? See a connection yet?
CAFE does need to go – the free market will take care of the manufacturers that cannot produce more than one car in their line up that gets more than 30mpg as gas prices continue to climb.
We’re capitalist most of the time and socialist when its politically expedient. Large mismanaged companies should be allowed to fail, and like a cancerous tumor, be removed from the body economic. A down economy is inevitable from time to time, and some weaker companies won’t survive. The average bear market lasts 18 months and average bull market lasts 8 years. Investments are made in a bear market that pay off in a bull market, buy low and sell high, but in our immediate gratification society, nobody can wait that long.
Airlines, banks and yes even automakers should be allowed to fail when they have mismanaged themselves into a negative position.
actually, the average fuel economy right now might be better if CAFE was not put into place.
The biggest gain in fuel efficiency was when cars switched to fuel injection. That was done more for Clean Air requirements than for CAFE.
The reason average MPG in the US is so low is because of SUVs and other light trucks. They are heavy. That market became dominant for two reasons: CAFE and import duty. CAFE played a role because it allowed US car makers to dump big engines (which people wanted) into their truck lines and wither away car sales.
Without CAFE, I suspect the US market would have continued to be “car centric” rather than “Light Truck centric”. Even a 500HP v8 car is going to get better mileage than a giant SUV. We probably would have a national fleet average of around 25 MPG. That is what the UK has now. Last year, I think the average in the US was about 20 although the demand destruction of SUVs I suspect it has gone up a bit.
And don’t even get me started on how imaginary CAFE numbers are. Here’s a hint: compare city mileage on a 4 cylinder and a V8. There’s very close. CAFE is great for HIGHWAY miles, but thanks to clogged highways most of us are doing much more stop and go city driving that we used to.
How about simply simply changing the 1997 tax provision that allows vehicles over 6000 pounds to be 100 percent written off.
Thses vehicles in effect get a a tax write off for small businesses
BMW X5
Cadillac Escalade
Chevy Astro
Chevy Avalanche
Chevy Express
Chevy Silverado
Chevy Suburban
Chevy Tahoe
Dodge Durango
Dodge Ram Van
Dodge Ram Maxi Van
Dodge Ram Wagon
Dodge Ram 1500
Dodge Ram 2500
Dodge Ram 3500
Ford Excursion
Ford Expedition
Ford Econoline E-150
Ford Econoline E-250
Ford Econoline E-350
Ford F-150
Ford F-250
Ford F-350
GMC Yukon
GMC Safari
GMC Savana
GMC Sierra
GMC Sierra Denali
Land Rover Discovery
Land Rover Range Rover
Lincoln Blackwood
Lincoln Navigator
Mercedes ML 320
Mercedes ML 500
Mercedes ML55 AMG
Toyota Land Cruiser
Toyota Sequoia
Toyota Tundra
Either eliminate that tax advantage or at least let it apply to vehicles under 6000 pounds too
The problem with the market-driven approach is that the market operates WAY faster than the auto industry can respond. Case in point – the last 9 months! Almost overnight (in car industry terms, anyway) consumers stopped buying SUVs and wanted efficient cars. When will the industry deliver? 2 or 3 years… maybe!
As of this morning, oil is down to $118 and gas in my (very expensive) area is $4.05/gal. If it gets below $4, you will hear the world’s loudest “oops, never mind” as Americans fire up the old gluttons and get on with life as it used to be.
Markets work great for stocks, where computers can trade in milliseconds based on supply and demand. Detroit has proven it cannot think past the end this week, especially when it comes investing lots of money in long-term solutions to problems that haven’t yet risen to crisis level on their radar. Someone has to do their thinking ahead for them, and I’m afraid you actually DO need the government for that.
KixStart is right on the money. CAFE is a boondogle of a regulation that treats auto manufacturers like wholesalers and kills the possibility of a boutique auto company.
Adding a revenue neutral tax to all fuels is the BEST method to fixing our problems. The key being revenue neutral, meaning taxes must decrease elsewhere to offset the gas taxes.
Benefits of a $2/gallon tax on gas:
– It’s a poison pill for the speculators
– No need for CAFE regulations
– No need for alternative fuels legislation (existing and new), the incentive is the high price of gasoline
– No need for alternative fuels subsidies either
Let me be clear, this is a nasty tax and must be implemented in a revenue neutral manner. I’m not going to argue that the government has the stones, the know-how or the stomach to do it.
CAFE, I feel, still has a valid purpose. Sure, high gas prices change the type of vehicle people drive, they ditch the SUV and get a car. The problem is, there really doesn’t seem to be a lot of development on increasing car fuel economy. We may hear a lot about hybrids and electric vehicles, but there is so much that can be done with the vehicles that don’t involve electric propulsion. Having tighter CAFE standards requires the vehicle manufacturers to improve the fuel economy of the cars they already produce. Most of the cars being built right now probably meet the current regulations and that’s about it. If they make the car CAFE standard higher, manufacturers will be forced to improve the mileage of the cars. Lutz is missing the point here, CAFE isn’t just to move people into cars, it’s also there to IMPROVE the cars.
snabster: I’ve never heard that argument before, but it is thought-provoking. You may be right in a sense. It wasn’t so much CAFE as the light-truck exemption that did it, but certainly if CAFE never existed then manufacturers never would have felt the need to push SUVs as hard as they did.
The history of government regulation is riddled with unintended consequences. The revised CAFE standard will be no exception.
For the free-market types: I agree wholeheartedly that the market will weed out the inefficient. But, and this is where I’m sure we’ll disagree, it will only work without regulation when the price of gas fully internalizes its costs. Or, to be more accurate, when the price of automobile transportation internalizes its costs. You don’t even want to contemplate how much tax that would require.
The point of CAFE (or gas taxes) isn’t to reduce the fuel consumption in lieu of market forces. It’s to reduce it in advance and in anticipation of market forces.
A lot of regulation is what could be called “diagnostic”, rather than proactive or reactive. Diagnostic regulation exists not to supplant the market, but to reduce the sometimes-brutal market corrections that occur.
Put it this way: imagine what the auto market would look like if we didn’t have any fuel economy regulations–even relatively fuel-efficient cars would be gas guzzlers, and the “mainstream” car would be terrible. Now imagine gas spiking to four or five dollars a gallon as it just did. Instead of an inconvenience or slight expense increase, you end up with shortages and whole swaths of the driving public flat out unable to drive.
And then there’s the economic and social impact of said condition. Right now, people are annoyed; if the average car got 10mpg, there’d be rioting in the streets, especially as the cost increased spills over to other industries.
Championing the self-correcting nature of the free market is all well and good, but we have to remember that the market is a fickle b_tch: she doesn’t care when, how, or whom she “corrects”.
CAFE isn’t great: there’s a lot of pork-barrel exemptions and nonsensical provisions that make for “interesting” side effects (like the artificial light truck bubble). But we do need something to get fuel use down in times of plenty. I’d fully support an increased gas tax if I thought it stood a chance at passing intact, but there’d be so much whinging and complaining from the American citizenry that any tax we got would either be so full of holes as to be useless, if it passed at all. CAFE is nice because it has a small legislative footprint (automakers only) instead of the whole fuel-using population and doesn’t actually cost money up-front, where a gas tax takes money directly out of pocket. The difference between CAFE and a gas tax is that, under CAFE, the manufacturers are obliged to produce (and pay for the development of) fuel efficient cars regardless of the price of fuel; with a gas tax, anyone using fuel would be required to pay the tax and the manufacturers would be required to spend R&D dollars.
Again, CAFE is broken. But it’s the implementation that’s broken, not the concept.
Think of it this way: If we’d already had a higher federal gas tax or stricter CAFE standards without the light truck loopholes, the big three wouldn’t have put all their eggs in the light truck basket, and they would all probably be in better shape now because of it. And as a bonus, fuel prices would likely be lower and more stable because of the lower demand. And that’s to say nothing of the cost of environmental damage that could have been reduced thanks to reduced fuel consumption.
I’m skeptical of all religious claims, including claims of the Church of the Free Market. Personally, I’d rather we had policy designed to get out ahead of the market and try to prevent chaos before it happens. The market simply reacts when the ship has already pretty much hit the iceberg. I don’t think it’s wise policy to let the twin market drivers of fear and greed govern every aspect of our society.
tuskentower, it has nothing to do with stones. The government is itself neuter. The politicians who run it are responsible to the people who elect them. If you want an increased fuel tax, you have to convince your fellow voters that it’s a good idea.
Otherwise, you’re just asking the politicians to submit to being fired by the voters. (Maybe you think that’s a good thing — but we’re talking about actually impacting reality here, not our own fantasy world.)
I like markets. I studied economics and I appreciate their value. However, markets have no concept of neighborhood effects, strategic dependencies or any other issues… they’re just a way of setting a price and efficiently allocating the resource. Sometimes, the markets need a push to enhance our strategic posture, conserve vital resources, control pollution, ensure future well-being or whatever, and an efficient and proper tax can help accomplish that.
NICKNICK, As for what gets done with the revenue, that’s a separate issue. Add a tax to fuel and make it revenue-neutral by reducing or eliminating a different tax, if you like. Ifyou don’t like the way your representatives are spending tax revenues, I suggest you vote to replace them.
I’d also point out that the current tough-talkin’, oil-lovin’, deficit-reducin’, gummint-limitin’, free-marketeerin’ Presidunce has run up the National Debt and committed us to trillions in absolutely required future spending (debt service and future veterans support, for a start) without doing anything whatever about the concerns that faced us when he took office.
CAFE would have worked if the feds had slowly, but surely, raised it incrementally. Instead, they (no doubt encouraged by industry lobbying) let it sit unchanged for a long time, thus helping to nurture the truck/SUV boom that’s now busting.
Contrary to what someone above said, I don’t believe that gas prices dropping below $4.00 will magically get people to resume their old habits. I think people woke up and realized that even at $3.99/gal stupid useless vehicles are just eating up bank accounts… with no end in sight. I think Ford CEO Alan Mulally had it right when he said the market has fundamentally and permanently changed.
The American “market” has been notoriously short sighted for most of its history. I have complete faith it will prove to be as myopic in adopting “good” behaviors as it has been in adopting “bad.”
By mid-September, a re-election panicked Congress (D’s and R’s alike) will find a way to open up the entire country to drilling and coal sand/tar/shale strip mining, issue energy tax rebates, suspend the gas tax and do whatever it takes to ease their constituent’s “pain at the pump” just in time for the second Tuesday in November. “W” will pay Halliburton $10b to drill an oil well on the front lawn of the White House right before he moves out, and America’s “psychological” energy crisis will recede into history…
Retarded Sparks:
The industry did respond – certain players were not able to because they invested heavily in trucks and SUVs and didn’t heed the writing on the walls.
Toyota, Honda, Nissan, Hyundai/Kia, etc all are making money on small cars right now. Some have larger trucks and SUVs that aren’t doing well, but they have all their bases covered with a good mix of vehicles that generate a profit.
Jon Paul wrote:
Anyone care to speculate how sh*tty average mpg would be right now if not for the original CAFE standards in the 1980’s?
I would speculate it would be much better. It was partly CAFE’s fault that station wagons were killed and replaced with truck-based SUVs because of special exemptions for the latter in the CAFE rules.
How long did it take people to migrate out of their econo boxes the last time we had a petro price spike in the early 80s? If gas goes back down I give it 10 years for people to Cowboy up to Canyoneros once again.
James 2:
I think Ford CEO Alan Mulally had it right when he said the market has fundamentally and permanently changed.
I would speculate it would be much better. It was partly CAFE’s fault that station wagons were killed and replaced with truck-based SUVs because of special exemptions for the latter in the CAFE rules.
That’s without the light truck exemption, not without CAFE. Remove CAFE entirely and you lose the incentive to make efficient vehicles–regardless of their ride height–outside of price spikes or supply crunches.
Remember what the average car from the 1970s was like? I imagine that, without CAFE, they’d still be making land yachts and only stopping to panic every ten or so years.
I still maintain that CAFE isn’t a bad thing per se, but the light truck and ethanol exemptions are terrible examples of why regulation should never be subject to porkbarrelling.
psarhajinian: That’s without the light truck exemption, not without CAFE. Remove CAFE entirely and you lose the incentive to make efficient vehicles–regardless of their ride height–outside of price spikes or supply crunches.
Scrap the light-truck exemption, and the pressure would have been on to scrap CAFE completely. Which would have been a good thing.
CAFE only exists because of the light-truck exemption – in other words, it only exists because buyers could get around it (by buying a light truck instead of a full-size car).
Every time I hear a call for elimination of the light-truck exemption, it reminds me of those who demand “strict” enforcement of speed limits on limited access highways because they mistakenly believe that anyone driving over the speed limit represents death on wheels. Never mind that the only reason people aren’t pushing for higher limits is because there is an unofficial leeway allowing drivers to exceed the posted limit. Eliminate that leeway, and suddenly people will be clamoring for higher limits.
Congress is economically dumb (in a collective sense), therefore CAFE is dumb.
I’m no fan of taxes. But tax the consumer end to change behavior. Set a floor of $X/gallon for wholesale gasoline. If the price goes below that, tax it up to that amount.
Where the taxes go, is, unfortunately, a function of who we elect.
Orian:
Now now – most of our current tax dollars are being sent over seas to fund our little incursion into Iraq. That’s costing what, around $30+ million a week?
At the risk taking this thread completely OT, your Iraq estimate is off by an order of magnitude+.
That said, total defense spending is historically (post 1940) low GDP-wise. It’s our collective middle class (sense of) entitlement – not Iraq, not Bush, not Cheney, not Blackwater contracts, not Dems or the GOP – THAT will bankrupt this country.
Kill CARB while you’re at it.
–chuck
CAFE is also, IMO, responsible for the awfulness of small, efficient cars in the US. Why? Because these cars exist only to make the CAFE numbers, and the big automakers (especially the US-based) treat them as just that.
I also suspect part of the domestic auto industry’s support of them was that CAFE penalties were a way to make imported luxury autos more expensive.