Study: Automakers’ Cost to Meet US MPG Targets Is 40 Percent Less Than Originally Estimated

The cost of automakers complying with toughening federal fuel economy standards could be far less than expected.

This is according to the International Council on Clean Transportation, an independent research group, which released a report concluding automakers costs could be reduced by 34 percent to 40 percent per vehicle in the 2022 through 2025 phase. Automakers are already heading in this direction through new technologies like turbochargers and advanced transmissions, and lighter weight materials such as aluminum.

The Environmental Protection Agency had estimated that automakers would have to spend an additional $875 per vehicle to meet the second phase standards starting in 2022, compared to 2021 standards. The research group’s study reported that cost would only go up by about an additional $551 per vehicle.

If taken seriously in Washington, that study could undercut the arguments automakers and their lobbying groups have been making to the Trump administration. Automakers say the costs will be excessive and could cost American jobs.

The new study concludes that automakers have already started the transition process that will gradually improve to meeting the fuel economy targets at a lower cost.

“All of those evolutionary changes, just getting a few percent here and a few percent there from those allow more cost-effective implementation of the regulations,” said Nic Lutsey, the report’s principal author.

In late February, major automakers sent letters through their lobbying groups to Scott Pruitt, the new head of the EPA. They’d made the argument that the 2022-2025 mandates would be impossible to reach under recent car buying trends favoring trucks crossovers, and SUVs; and that the cost of designing and manufacturing these new fuel efficient vehicles would have very negative impacts on the auto industry.

Automakers had signed off on the plan crafted by the EPA, National Highway Traffic Safety Administration, and California Air Resources Board in 2012. The midterm review period was set to take place through April 2018, but had been prematurely ended in January before the Obama administration left the White House.

President Donald Trump changed course on that decision last week, extending the review period for the standards. Trump is expected by many to soften the rules in favor of automakers.

SEE ALSO:  EPA Finalizes 2025 Fuel Economy Rules Before Trump Enters Office

The ICCT’s report is likely to be taken seriously in Washington. The independent research agency played a key role during the Volkswagen investigation over diesel emissions fraud. The agency worked closely with CARB and EPA on the findings.

Another market force that could lighten the cost for automakers is if all-electric and plug-in hybrid vehicle sales take a higher share of new vehicle sales, the new ICCT study says.

California regulators are likely to applaud the ICCT report. CARB will be meeting today and Friday, and is expected keep their word by supporting the Obama administration’s decision to finalize the rules.

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