Why do consumers like CAFE? Well, the short answer is that a gas tax (which is infinitely superior from a pure policy perspective) hits them directly in the pocketbook, while CAFE forces automakers to absorb the cost increases before passing them along to consumers in the form of higher MSRPs. But underlying this fact is a larger issue that’s driving support of increased emissions regulation: gas is getting more expensive. As I pointed out in my recent editorial on the subject, for all the automakers’ whining about CAFE increases, it seems that energy prices are moving the market in the same direction anyway (the average family will spend $3,100 on gasoline this year).
According to a Consumer Federation of America study [PDF], the steadily-rising price of energy has consumer’s even more concerned about gas prices and dependence on the volatile Middle East than they were during the height of the last fuel price shock in the Summer of 2008. As a result, support for a 60 MPG fuel economy standard doesn’t go below 49% (among Independents) even assuming a ten-year payback period, and earns the support of 63% of Democrats. And before you dismiss this support as hysteria, consider the underlying economics for a moment…
Who’s the most efficient automaker of them all? According to TrueCar’s projections for May, Smart, MINI, Hyundai, VW and Scion top the list for sales-weighted fleet fuel economy. Meanwhile, the industry average of 22.4 MPG might not sound like much, but when you convert it to the “unadjusted” numbers used for CAFE, that 22 MP turns into about 28 MPG. Considering the 2015 CAFE standard is 35.5 MPG between cars and trucks, that average shows the industry to be fairly well on-track to comply with the initial CAFE ramp-up. In fact, since 35.5. MPG CAFE equals about 27 MPG EPA, it seems that the top three brands on this list (Smart, MINI, Hyundai) can pretty much twiddle their thumbs between now and 2015, as they’re practically in compliance with the 35.5 MPG standard already.
One of the most consistent and valid criticisms of GM’s product development, even in the post-Lutz era, is the class-leading weight that so many new GM products carry around with them. To a number of industry observers, the lingering weight problem that so many of GM’s cars struggle with is a sign of corners cut in the design process. GM’s cars may look, feel and drive better than they did five, let alone ten, years ago, but clearly the battle for truly “world class” products isn’t over.
And now we’re getting some of the first indications that GM is taking the weight issue seriously, as GreenCarCongress reports that GM’s engineers have pulled 13 lbs out of its 3.6 liter direct-injected V6 simply by redesigning its head. Given that the 3.6 is already one of GM’s better engines, and is used in a huge number of its vehicles, that’s a solid first step as The General takes on the battle of the bulge.
When Lotus showed five new cars at the Paris Auto Show last summer, the British Sports Car brand raised a number of eyebrows amongst the motoring press. Not only was Lotus abandoning its lovable but hugely unprofitable enthusiast/trackday niche, but it was also reaching for Ferrari and Porsche-style brand recognition while offering an ambitious but underwhelming (on paper anyway) vision of its future product lineup. Five new vehicles (three mid-engine, two front-engine, four two-door coupes, one four-door sports sedan) is a lot of development work, and initial reports that Lotus would use Toyota power including hybrid drivetrains didn’t create much for enthusiasts to get worked up over. Lotus has since backed away from using Toyota power, but developing engines for five new vehicles creates a whole new set of challenges. And, as it turns out, Lotus has wuietly backed away from the most ambitious elements of its plan, and the firm now plans to launch only two cars at first. Has Lotus turned the corner from hype machine to credible competitor?
It started as a flippant Twitter comment, in which GM Global Marketing Officer Joel Ewanick agreed to champion a return for the “El Camino” if 100,000 potential buyers raised their hands for it. Smelling an opportunity for some publicity, Jalopnik quickly picked up on the “challenge” and urged readers to leave a comment in support of the trucklet. At first Ewanick tried to hedge, saying he needed 100k deposits, rather than blog comments, to approve an El Camino for the US market. But now the former Hyundai marketer has taken Jalopnik’s challenge to Chevy’s Facebook page, giving a surprising amount of credibility for a “challenge” that began with a throwaway tweet. What makes Chevy’s endorsement of the “El Camino Challenge” even more surprising: the total lack of apparent enthusiasm.
TTAC has paid close attention to the fortunes of ethanol in the United States, where grossly wasteful subsidies have forced the corn-derived fuel into the fuel supply in growing percentages, drawing backlash from small but vocal portions of the population. But much of the ethanol ire is directed at higher blends like the recently-approved E15 and the increasingly-unpopular E85 mixtures. Meanwhile, most Americans regularly fill up their tanks with E10, which has become standard at pumps across the nation. But in Germany, where E10 was only just introduced, people are rejecting the low-ethanol blend that even the most vocal American ethanol opponents use every day. Initially, the biofuel industry in Germany blamed a lack of education for suspicion of E10, but according to Autobild, some 75 percent of German drivers now know whether their vehicle takes E10 (and most do)… but still, only 17 percent actually chose E10 for their last fill-up. And only 39 percent who know for a fact that their car can take E10 have ever used the ten-percent ethanol fuel. Why? Despite the high level of education, 52 percent of respondents still feared motor damage from the ethanol. Another 50 are opposed to “filling up with food.” Sometimes the more you know about something, the less you like it.
The alliance believes it is inappropriate to be promoting any specific fuel economy/greenhouse gas at this point
How’s that for some old-school, don’t-tread-on-me corporate attitude? No room for compromise, no sense of nuance… and yet, that doesn’t actually represent the industry’s position at all.
Rated at between 21/28 (2.5l, manual) and 27/34 (2.0l, auto), the Nissan Sentra is a fairly efficient car, albeit rapidly falling out of contention with its new 40 MPG competitors. Using a computer simulation, the developers of the “split-cycle” Scuderi engine showed that their unique, downsized, turbocharged engine can improve up to a 35% improvement in a “stock” Sentra’s fuel economy, when paired with the firm’s AirHybrid system. It’s not clear, even after listening to a podcast with VP Steven Scuderi, which engine-transmission combination was simulated as the “stock” baseline, but for practical purposes the best-performing Scuderi engine (tuned to match the “stock” engine’s power) achieved between 40 MPG and 32 MPG combined (around 50 MPG CAFE combined, or approaching the 2025 standard). Or, not. The EPA city test reportedly does not show improvements with idle fuel shutoff (stop-start), but Scuderi’s simulated stop-start system shows a 14% improvement over the non-start-stop “stock” Sentra on the same FTP-75 test. Was Mazda bluffing (it’s since said it would bring stop-start to all its cars), or is Scuderi’s simulation off? Scuderi (which has nondisclosure agreements with 11 OEMs and is in discussions with 4-5 more) says it will release more information next week at the Engine Expo 2011 in Stuttgart, Germany.
As the graph above [via NHTSA’s latest CAFE data, in PDF here] shows, passenger car fleet economy has actually leveled off after a brief spike in recent years. Possibly even more surprising is the fact that imports spent a portion of the last decade actually beating the imports in passenger car economy after a 20+ year slide in import CAFE performance [more long-term fuel economy charts here]. These trends illustrate that the sides in the emerging “Battle of 62 MPG” may not as easy to characterize as you might think… as does a new hint from NHTSA about the shape of future CAFE increases. According to the Detroit News, NHTSA is signaling that
it is researching the impact of raising fuel efficiency in the 2 percent to 7 percent annual range.
The agency said it has “tentatively concluded” that 7 percent annual increases is the maximum that is technically feasible.
Before it sets a requirement, NHTSA must take into account a number of factors, including the costs of the regulation and safety impacts.
NHTSA and the Environmental Protection Agency said previously they are working together on 3 percent to 6 percent annual increases.
The high end of that range would result in the much-discussed 62 MPG by 2025 standard, an achievement the government insists would only cost as much as $3,500 per vehicle. The industry points to cost estimates closer to $10,000 per vehicle for that level of CAFE increase. The battle continues…
President Obama devoted his weekly address to energy and transportation policy this week, speaking to the nation from an Allison hybrid bus transmission plant in Indiana. A White House blog post accompanying video of the President’s speech included a large infographic on “The Obama Energy Agenda And Gas Prices,” the transportation-oriented section I’ve excerpted above. This one section is actually a fairly good representation of Obama’s auto-related energy policy preferences, and illustrates why I often find myself criticizing the president here at TTAC.
In TTAC’s early years, we spilled much digital ink over GM’s bloated brand portfolio, wondering again and again what brands should be cut, which should move upmarket and which should move downmarket. It’s a fun exercise, but one that history has largely passed by. Not only did GM cut Saab, Hummer and Pontiac in its bankruptcy, but Chrysler has more than doubled the potential number of brands to be sold through its distribution channels, shifting the brand-clutter center of gravity towards Auburn Hills. But GM isn’t done struggling with the legacy of the Sloan system, as GM North America boss Mark Reuss tells Automotive News [sub] that GM still has at least one major branding battle on its hands: Chevy versus GMC.
We need to make sure that we drive the differentiation in the product and the price to create that separation that we know we can on GMC and Chevrolet. I don’t think we have the margin opportunity set up quite right with GMC.
Though the EPA won’t actually announce its 2025 CAFE standard until September, the California Air Resources Board’ insistence on a 62 MPG standard for ’25 has the industry’s analysts and talking heads in something of a frenzy. Smelling the smoke on the breeze, Automotive News [via AutoWeek] trots out a range of interpretations of the proposed 62 MPG standard, from the frightening to the apocalyptic. Cost increases per vehicle for a 62 MPG by 2025 standard are estimated by government agencies at $3,500 “at most,” while Alliance of Automotive Manufacturers reckons they’ll run “as much as $6,400.” Sean McAlinden of the notoriously industry-friendly Center for Automotive Research figures the market will have to shift to 64% plug-in hybrids, at a price increase of $9,970 per vehicle, while the AAM adds that 62 by 20205 “could cut car sales by 25 percent, costing the industry 220,000 jobs.” And the EPA seems to be listening to the rising chorus of grumbles, as the agency’s Margo Oge soothed the locals on a recent visit to Detroit with the words
We will be very mindful — and I underline ‘mindful’ — of the consumer throughout this process. Unless people buy these new clean cars and trucks, and buy them in large numbers, everyone loses.
But if CARB wants 62 MPG by 2025, it will get it from the EPA. Which means the real question is simply how much will the standard actually add to per-vehicle costs? Is the industry inflating its numbers in hope of a teaspoon of federal sugar to help the medicine go down? Is the 62 MPG standard really an industry killer?
A massive study by the Government Accountability Office into “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue” has turned up an interesting finding. It seems that the government’s desire to buy more “alternative fuel vehicles” (AFVs) may actually increase the amount of gasoline used by government fleets. Why? Because agencies largely buy E85 ethanol-powered vehicles to fulfill their AFV requirements, and there aren’t enough E85 pumps to actually fuel the fleet, forcing agencies to obtain waivers to buy regular gasoline. Hit the jump for the report’s full findings on this, the latest unintended consequence of America’s ongoing ethanol-subsidy boondoggle.
With all the excitement brewing in the Compact segment, some may be ignoring a building problem at the other end of the market, in the full-sized truck segment. Automotive News [sub] reports that GM’s truck inventory currently stands at 111 days of surprise, or a whopping 275,000 trucks sitting on lots. In April, Silverado was more than 3,000 units off the previous month’s pace, while Sierra was just over 1,00 units off. GM’s US market boss Mark Reuss tells the industry paper
We’re going to do something about it, but we haven’t made those calls yet… no one month makes a trend, so we’ve got to see where this one holds
Meanwhile, we’d be more worried about Chrysler, which saw Ram sales drop from nearly 22k units in March to 17,680 units in April. And not only is Chrysler more dependent on truck profits than GM due to its tighter balance sheet, it also has fewer high-efficiency alternatives to offer consumers who seem to be slowly responding to rising gas prices and moving towards more efficient offerings. And given that Automotive News [sub] is already noting that Chrysler has fallen behind on its “ambitious” sales goal and quoting analysts bemoaning Chrysler’s “perception” issues, it seems that Auburn Hills should be trying to get ahead of the story the way GM is.
A number of plug-in hopeful firms have been testing their future products in fleets, keeping a close eye on the data coming back as they prepare for their consumer launches or wider availability. One such vehicle, Toyota’s plug-in Prius has been testing for some time now, and while the results of US and European testing hasn’t been publicized yet, Wards Auto reports that the company has disclosed the results of Japanese testing with some interesting conclusions. With BYD and Chevrolet releasing data from their own plug-in testing, we should have the basis for some interesting insights. Hit the jump for more on the lessons learned and the data gleaned from this testing of next-gen drivetrains.
As the graph above [via NHTSA’s latest CAFE data, 
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