
Hard on the heels of yesterday’s story on Hyundai’s preparation for CAFE standard ramp-ups comes this counterpoint, courtesy of the Detroit Free Press. Walter McManus, director of automotive analysis at the University of Michigan’s Transportation Research Institute, did his own study on a possible 43 MPG 2020 standard and his findings, as presented at a Citi Investment Research conference call, seem quite positive for American-based automakers. McManus’s research took several basic assumptions for granted in order to reach his conclusions, namely that
• Gas prices will average $4 a gallon between now and 2020.
• Industry sales will be 16.3 million vehicles in 2020.
• Every manufacturer complies with 2016 CAFÉ standard.
• Plug-in hybrids and electric vehicles will be less profitable than gas-engine vehicles.
Now, right off the bat it’s possible to take exception to some of those assumptions. If gas doesn’t crack four dollars per gallon before 2020, for example, this blogger will be one confused student of history. Also, predicting over 16m units of new car sales is by no means a sure thing. Though a comfortable industry assumption based on the “old normal,” there aren’t many indications that 16m+ annual new car sales was a sustainable level for the US economy. Still, Mr McManus has been doing this for a while, so we’ll give him the benefit of the doubt. So, given his assumptions, what does he foresee for Detroit as it moves to meet a 43 MPG standard by 2020? In two words: great success.
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