New CAFE standards proposed for 2017 to 2025 build on previous economy rules introduced by the Obama Administration. Under the new standards, cars and trucks will have to achieve a fleet average of 40.1mpg by model year 2021 and 49.6mpg by 2025. Greenhouse gas standards would require 163g/mile of CO2 in model year 2025.
Current rules require a 35.5mpg fleet average by 2016 and an average CO2 level of 250g/mile. According to the US Environmental Protection Agency (EPA) the two standards together will cut greenhouse gas emissions from vehicles in half and nearly double the fuel economy of models compared to year 2010 vehicles.
But according to a new report from NADA, the economy rules will push up the price of new cars, potentially pricing more than seven million car buyers out of the new car market by 2025. According to estimates from EPA and National Highway Traffic Safety Administration, the 2025 CAFE rules will rise the average price of passenger cars and light trucks by nearly $3,000.
Estimates by the NADA published in its ‘The Effect of Proposed MY 2017-2025 Corporate Average Fuel Economy (CAFE) Standards on the New Vehicle Market Population’ report suggests that many lower income consumers, such as college students and working families, will not qualify for financing to cover this additional cost.
The study is based on an evaluation of a consumer expenditures report from the U.S. Bureau of Labor Statistics. NADA analysed the financial profiles and purchasing behaviour of a large sample of US consumers to calculate debt-to-income ratio for households to work out if they could afford the additional cost of a new vehicle.
Doug Greenhaus, NADA’s chief regulatory counsel for environment, health and safety, says the government needs to better understand the impact of the proposed fuel economy rules on consumers, before increasing the economy standards: “Disregarding vehicle affordability will undermine the environmental and national security benefits the administration is seeking,” Greenhaus said. “The proposed MY 2017-2025 fuel economy rules should be delayed until there is a more accurate picture of how prospective buyers likely will react.”
