Mercedes S400 Hybrid

Mercedes S400 hybrid.

The new federal fuel efficiency rules announced last week by the Environmental Protection Agency were hailed as a major success by the Obama administration and embraced by carmakers. But many car dealers—the folks closest to the consumer, and the point of sale—are still dragging their feet on hybrids and other fuel-efficient options.

“With tight family budgets and a shaky job outlook, consumers want to maximize their transportation dollars, not pay more for redundant rules and an unnecessary bureaucracy,” said Ed Tonkin, chairman of the National Automobile Dealers Association, in an official statement. “Under these new mandates, the price of new cars and light trucks will rise significantly, meaning fewer Americans will be able to buy the new vehicles of their choice.”

EPA and ROI

Based on the new rules, the average fuel economy for cars is estimated to be 37.8 mpg by 2016, while light trucks are expected to average 28.8 mpg. Automakers are expected to produce all kinds of hybrids in greater numbers to meet the targets—and will get bonus credits for building electric cars, plug-in hybrids and hydrogen fuel-cell models.

The cost of developing the more fuel-efficient fleet is pegged at $52 billion. Obama administration officials said the rules would raise the average price of a new vehicle by less than $1,000 in the 2016 model year and that many consumers would earn back the cost in fuel savings over three years.

For automakers, the new rules are an acceptable compromise that prevents California and other states from establishing even more stringent requirements. The new targets, which cover 2012 – 2016, help buy time for carmakers, which are now fighting the ability for California from drafting rules for 2017 and beyond. “America needs a road map to reduced dependence on foreign oil and greenhouse gases, and only the federal government can play this role,” said Dave McCurdy, president and CEO of the Alliance of Automobile Manufacturers.

Good for Europeans, But We’re Different

Dealers are not only at-odds with government officials, but with the car companies that provide the vehicles they sell. In fact, some Mercedes-Benz dealers are up in arms about the decision by Daimler executives to potentially make the flagship S-class a hybrid-only lineup. The dealers told Automotive News that the S-class switch to full hybrids—meaning no models offered with only internal combustion engines—could happen in Europe in 2013 and in the US by 2014. They believe it will undermine the perception of the Mercedes brand.

Tommy Baker, chairman of the Mercedes-Benz dealer board and a Charleston, SC, Mercedes dealer, said, “The most important thing in the American market—regardless of hybrid, lithium or electric cars—is that we Americans are different than any market and we are going to want those gasoline engines.” Baker said the goal of S-Class drivers is “not gas mileage.”

The Mercedes S400 Hybrid has been on the market since August 2009. US dealers said they wouldn’t be able to sell hybrid versions of the S550 V-8 model and S600 V-12 models, and the costly S63 AMG and S65 AMG. Yet, the luxury market is filling up with new hybrid models. Last year 10 percent of all Lexus models sold in the United States were hybrids.

Not all dealers are reluctant. Responding to last week’s new fuel rules, Adam Lee, President of Maine-based Lee Auto Malls, which consists of 20 dealerships selling domestic and foreign cars, said, “Today is a victory for American consumers and the auto industry.” Lee believes that higher fuel efficiency standards will help the US economy—by putting more US-built high mpg cars into dealerships. “Every day customers walk into my stores asking for the same thing—cars that go farther on a dollar.”

Lee sees higher mpg as the future. “My customers are already asking, when will we see 50 miles per gallon?”