Nobody likes to witness a family argument—much less get pulled into it. But the schism between auto industry lobbyists and auto company executives is hard to ignore, and the consequences are too important. The disagreement is about the need and wisdom of producing more fuel-efficient cars. And with this week’s national average price for a gallon of gasoline at $3.88 causing financial hardship, it’s heating up.

Lobbyists in a State of Denial?

The Alliance of Automobile Manufacturers—the industry’s largest lobbying organization—in a recent Wall Street Journal article claims that $4 gas is still not high enough for consumers to make any real changes in their car buying decisions and that new pollution and fuel efficiency standards should fluctuate with gas prices.

The AAM’s most vociferous and long-held arguments are that it’s just too expensive to make high-mpg vehicles, consumers don’t want them, and that it will cost American jobs. The group points to industry research showing that fuel-mileage and emissions proposals could raise the cost of a vehicle by as much as $6,400 by 2025, and that consumer will never pay more for efficiency. Therefore, light-vehicles sales would drop by 25 percent, killing about 220,000 jobs. As I’ve explained in a previous blog, the cost claim is based on a fundamentally flawed study which has been thoroughly refuted, and with it, the job killing claim.

The auto lobbyists appear to be in particular state of denial when it comes to consumer demand for fuel efficiency. Gloria Bergquist, vice president of communications and public affairs for the industry group, claims that Europe’s $8 a gallon price is the level at which consumers move to fuel-efficient vehicles in large numbers.

But the actual sales numbers show that at less than $4 gallon last month, sales of hybrids shot up 46 percent compared to the previous March, three times faster than the market average. At seven percent market share, hybrids and other fuel-efficient cars now comprise the same market share as traditional, truck-based SUVs.

The AAM appear to be proposing an unworkable and counterproductive system that would have fuel efficiency and pollution standards rise and fall with gas prices. Ms. Bergquist’s argument is that when gas hit $4 in 2008, small cars got big, but claims it was only temporary until the price at the pump dropped back down again.

Under the AAM plan, regulators would need to periodically monitor gas prices, and scale back on fuel efficiency and pollution standards whenever the price at the pump drops. But as the past two decade shows, the auto industry needs three or four years planning lead time and cannot base its product plans on short-term, volatile conditions in the oil market.

The View from the Corner Office

So it’s no surprise that the lobbyist arguments aren’t even winning over executives at the very companies they represent.

As reported in Bloomberg, New York Times, and the Wall Street Journal, Ford announced this week reported its largest first-quarter profits since 1998—despite surging gas prices. How did that happen? Alan Mullaly, Ford’s chief executive, told Bloomberg that his company is better able to cope with rising fuel prices now than in 2008, when it was too heavy on trucks and large SUVs. Ford suffered more than $30 billion in losses from 2006 to 2008.

But by focusing its lineup on fuel economy, he turned the ship around. The Euro-influenced, fashion forward Fiesta gets 40 mpg on the highway, and the new Explorer boosted its fuel efficiency by 30 percent compared to the last version. The company believes that as much as President Mark Reuss told the Detroit Press. “It only gets better as gas prices change.”

Honda, Subaru, Nissan, Kia and Hyundai all introduced more fuel-efficient compact and subcompact models. Several of the new models are 20 or 30 percent more fuel efficient than previous versions. Honda’s new Civic Hybrid gets 44 mpg in the city and highway. Even Porsche is getting in the game, introducing its most fuel-efficient vehicle ever, the Panamera S Hybrid.

60 MPG by 2025 is the Sensible Solution

There is a sensible solution to settle this squabble that everyone can rally around: setting long-term, stable standards that deliver 60 MPG by 2025.

60 MPG by 2025 delivers the long-term predictability and certainty that automaker executives need to plan new models and invest in new drivetrains. And it will deliver the fuel-efficient cars that our country needs to cut our dangerous dependence on oil, reduce dangerous pollution and protect consumer pocketbooks.

In the case of 60 MPG, what’s good for the country is good for the auto industry.

The post Auto Execs Debunk Own Lobbyists' Myth About Stronger CAFE Standards appeared first on HybridCars.com.

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It used to be the Los Angeles Auto Show was considered the “green auto show.” Now with gasoline soaring towards $4 gallon gasoline, every auto show is a green showcase. At this week’s New York International Auto show, a staple of the annual car circuit, the spotlight will be not be on the latest muscle cars but instead on the hottest market segments, fuel-efficient hybrid electric vehicles and high efficiency, conventional gasoline cars that get 40 MPG or more. With no relief in sight for high gasoline prices, 2011 is shaping up to be a record breaking year for fuel-efficient cars.

The Market Has Spoken, and It Wants More MPG

Rising fuel prices have primed consumer demand for fuel efficient cars. According to Michigan-based auto market expert Alan Baum, March sales of hybrids rose 46%, almost three times as fast the overall market rate of 17.2%, compared to the same month last year. The market for highly fuel efficient small cars, such as the Honda Fit, rose 30%, almost twice the average rate. The worst performing segment? Traditional, truck-based SUVs, which grew at 7.2%, less than half the rate of the market average.

As I blogged previously, the market for hybrids may be reaching a tipping point as the technology matures, spreads to more models, and gasoline prices keep rising. Last week, the 1 millionth Prius was sold in the United States.

According to Alan Baum’s forecast, the number of hybrid models (not including plug-ins) is expected to double by model year 2012 from the current 22 models to 43 models. Kevin Riddell, an auto analyst at consultant J.D. Power and Associates, sees hybrids and electric cars market share almost doubling by 2012, to 4.5% of all new vehicles purchases by 2012 from 2.4% last year. With a possible 13 million total sales this year, this could mean hybrid sales are on pace to top half a million units in 2012, vastly exceeding the 275,000 units sold in 2010.

Many of this next wave of hybrid models will use an innovative new, lower-cost design called the “Parallel 2-clutch” or “P2”. This simpler system is being introduced on new hybrids this year by Nissan (M35 Hybrid), Hyundai (Sonata Hybrid), Kia (Optima Hybrid), and Volkswagen (Touareg Hybrid) and in near future by Honda (yet unnamed midsize vehicle), BMW, Mercedes, Audi and Porsche. According to a new Society of Automotive Engineer report, the technology can lower the cost of today’s dominant design by at least a third and probably more. As I was quoted in USA Today as saying, these low-cost systems are “system[s] for the masses that’ll really push (hybrids) into the mainstream.”

40 is the New 30 (MPG): 11 Models Join the High Mileage Club

As reported by Automotive News, there will be 11 cars offered this calendar year that achieve at least 40 MPG on the highway. This development is nothing short of remarkable, especially after decades of resistance from automakers to building highly fuel efficient cars. These engineers have accomplished what auto lobbyists have long said couldn’t be done. As the floor of the New York auto show will show, it already has.

Members of this exclusive but growing 40 MPG club are: 2011 Ford Fiesta SE Sedan; 2011 Ford Fiesta SE Hatchback; 2011 Chevrolet Cruze Eco; 2011 Hyundai Elantra; 2011 Smart ForTwo; 2012 Ford Focus SE Sedan; 2012 Honda Civic HF; 2012 Hyundai Accent; 2012 Hyundai Veloster; 2012 Kia Rio; 2012 Kia Rio; and 2012 Mazda 3.

Long Term Fundamentals Strong: High Gasoline Prices, Stronger Standards

Hybrids and high MPG cars are likely to remain hot. Last week Moody’s, the credit rating agency, upgraded their outlook on the global integrated oil and gas sectors on the basis that soaring oil prices will “remain strong well into 2012.”

Equally as important, there is now near certainty that U.S. carbon pollution and fuel economy standards will be significantly strengthened. U.S. Congress no longer has a route to block the U.S. Environmental Protection Agency or California from moving forward with model year 2017 to 2025 standards this fall. President Obama also recently announced a 33% import target cut which will undoubtedly necessitate stronger fuel economy standards.

This next phase of standards could result in average fleet fuel efficiency as high as 62 mpg. It will clearly accelerate hybridization of the fleet, with perhaps over half the market by model year 2025 being hybrids, according to joint US EPA, DOT and California analysis.

Beginning this Friday, as people and press file through the New York International Auto show, they will be seeing a lot of new designs, and a lot of innovative new fuel efficient vehicles. The market has spoken and automakers are finally delivering.

This guest post was contributed by Roland Hwang, Transportation Program Director for the Natural Recource Defense Council’s energy program. Based in San Francisco, he works on transportation energy and global warming issues at the state and national levels.

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