NADA Says CAFE Rules Could Price 7 Million Buyers Out of The Car Market

According to the National Automobile Dealers’ Association, proposed Corporate Average Fuel Economy standards could price some 7 million potential car buyers out of the new vehicle market by 2025.

The proposed rules aim to achieve a fleet wide average fuel economy standard of 54.5 miles per gallon for cars and light trucks, which according to projections from the Obama administration; will add around $2,000 to the cost of each individual vehicle.

Adding in the projected $1,000 average cost from fuel standards mandated for 2012-2016 light vehicles and the total amount is around $3,000 greater per car than in 2011 (taking into account adjustments in inflation).

NADA has said that this additional cost needed to cover technologies necessary for achieving these fuel economy targets will be too much for many lower income consumers, including working families and college students.

According to Rebecca Lindland, an automotive analyst with IHS, given that the average price of a car today is approximately $30,000, an additional $3,000 will simply push financing beyond the realms of those on lower incomes, making a huge dent in potential new vehicle sales.

Don Chambers, a Ford dealer from New Mexico, who also chairs the NADA’s Committee on Government Affairs, agrees. “Loan qualification is based mainly on the customer’s income, existing debt and the vehicle price. The resulting calculation is simple. Fewer car shoppers will qualify for auto financing with higher vehicle costs.”

On the flipside, environmental groups believe that in the long term, average savings for consumers over the life of their vehicle will offset the higher purchase price and monthly payments, particularly in terms of fuel consumption and visits to the pumps, with some sources citing as much as $8,000 worth in savings during the period of ownership.

Yet, NADA, which has been involved in a number of CAFE hearings, believes the federal government still needs to better comprehend the economic impact a 54.5-mpg standard will have on consumers and auto financing before finalizing the rules.

“Disregarding vehicle affordability will undermine the environmental and national security benefits the [Obama] administration is seeking,” remarked Doug Greenhaus NADA’s chief regulatory counsel for the environment.

So far, in previous CAFE hearings, several automakers, including General Motors Hyundai and Toyota have said they’re in favor of stricter fuel economy standards, though in GM’s case it would hinge on significant technological advancements, something Mike Robinson, the General’s Vice President, Sustainability and Global Regulatory told Ward’s Auto during an interview.

Others, such as Mercedes-Benz and Volkswagen, which already sell some of the most fuel-efficient cars in the US are opposed to the regulations, since at present, the new CAFE requirements offer no incentives for diesel powered cars.

The Detroit News

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  • Chris C.

    And plenty of news organizations will dutifully run with this story without any context. NADA has fought efficiency efforts for years, I’m guessing because the SUV class of vehicles is wildly more profitable for them. Bad for you, good for them.

    Just yesterday I put gas into my Chevy Volt for the first time in EIGHT MONTHS. The last time I had filled up was August 2011, on our way home from a roadtrip. Since then I’d driven 3400 miles of regular commuting around the city and occasional longer days out to the suburbs somewhere. My lifetime average is 101 MPG, including long roadtrips of 1000 miles or more.

    That’s TODAY, in 2012. 54.5 MPG by 2025? Uh, yeah, that should be no problem.

    Always examine the motive of the source of a press release …

  • CharlesF

    Please get back on the wagon. EPA CAFE 54.5 MPG is only 40 MPG EPA sticker.

    So all of the Prii and the new Camry Hybrid make the new CAFE. Ford will have the C-Max and Fusion by the end of the year (the current Fusion Hybrid is just 1 MPG short). Honda has the Civic hybrid and Insight. Most if not all of these cars can be had for under the $30,000 NADA target.

    Then there are the plug in cars from Nissen, GM and others, which cost more, but offer over double the CAFE MPGes.

  • MrEnergyCzar

    The peaking of cheap conventional oil could take 70 million drivers off the road…. they should be more worried about that and be demanding 100 mpg cars so people could better afford to buy and fuel them….


  • E Anderson

    This analysis does not include the additional costs that are being recommended by NHTSA for new safety features, such as backup cameras, and lane departure warning. Also, how will these CAFE standards affect vehicles such as Full-Size Trucks, Minivans, and other larger vehicles. A compact or mid-size vehicle does not work for everyone. I am concerned about how the new CAFE standards will affect lower income individuals and also how it will affect the overall marketplace.

  • MS

    Mercedes-Benz and Volkswagen maybe against the reduction, but in Europe they are also dealing with the need to reduce the CO emissions, also in greater levels than the average.

    The European commision publication already refer that:

    Car makers have to use some sort of hybridization or to reduce the car weight.

    Being the later harder and harder due to the safety regulations on additional equipment to be used in.

  • Christ

    The author thinks only the new cars are the option to buy when people making purchase of auto. If the new car prices go up and people need cars, they will budget themselves and buy used cars. The demand of higher mileage cars and trucks are the way to go before all the money goes to middle east.

  • veek

    The market’s response to the Chevrolet Volt might indicate what happens when you try to sell what amounts to a $15,000 car with a $25,000 propulsion system. People may be reluctant to spend a lot of money to save a little fuel.

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