Car Dealers Fight Higher MPG Rules, Again, Over Affordability

By John Voelcker

John Voelcker

Senior Editor BIO

John is Senior Editor for High Gear Media. In addition to news coverage and new car reviews, John creates and oversees all editorial for High Gear's... More

LATEST ARTICLE
Do Electric And Natural-Gas Cars Compete Against Each Other?
We've been thinking a lot about natural-gas fueled vehicles, for reasons that will become clear in... Read More

• #3LEADERBOARD RANK
• 2901ARTICLES CONTRIBUTED
• 1950COMMENTS POSTED

712 views Jan 19, 2012

Follow John

Add to circle

Used car salesman

Enlarge Photo

You'd think that if President Obama, two government agencies, and 13 of the world's largest carmakers supported a set of new regulations to improve gas mileage, they might be popular with auto dealers too.

Not so.

At a Tuesday public hearing on the proposed joint NHTSA-EPA standards for fuel economy in 2017-2025 vehicles, the National Auto Dealers Association (NADA) continued the battle against more stringent gas-mileage requirements it has waged since last year.

The new regulations will increase corporate average fuel economy to to 54.5 miles per gallon by the 2025 model year (or around 42 mpg in the real world).

Fuel efficient cars to sit on lots?

The group claims it's in favor of more efficient cars--but not that much more efficient.

As NADA representative Bailey Wood wrote, "Dealers support fuel economy increases. For reductions in greenhouse gases and the nation’s dependence on oil to decline, people will have to buy these new technologies and put them on the road. 

Then Wood identifies the crux of the matter: "If fuel economy is raised too much, too fast and too soon prices will escalate substantially and consumer choice will be limited.

He continued, "Consumers will simply choose to buy used vehicles or hold onto their older cars longer. So there is no environmental, economic, or national security benefit if these new vehicles just sit on dealers' lots."

Given that the average U.S vehicle is now more than 10 years old--the oldest it's been since World War 2--that scenario seems somewhat unlikely. Eventually those vehicles will have to be replaced, even if at a slower rate than in past boom years.

U.S. Capitol

Enlarge Photo

Study: coming in future

New Mexico Ford dealer Don Chalmers, who chairs NADA's Government Relations committee, claimed at the hearing that the new rules would cost $5,000 extra per car.

His claim is to be backed up by a study the association plans to release "in several weeks," NADA said on its website.

The cost increase estimate is contradicted not only by projections from the agencies' required estimate of the new rules' effects, but also by industry analysts contacted by GreenCarReports.

The real problem: getting car loans

NADA claims the government's numbers are wrong, in part because the added cost--the government says $2,000 more by 2025--will increase prices enough that many buyers will not be able to get financing to purchase new cars.

Auto loan

Enlarge Photo

That would indicate most buyers are opting for cars that take them right up to the limits of their creditworthiness.

Which doesn't seem like a good idea, though it obviously benefits the auto dealer who sells a more expensive car than one that costs less and gives the buyer more financial elbow room.

When it arrives, industry analysts will likely pore over the upcoming NADA study with interest.

Will MPG will destroy U.S. industry ?!?!?

Previous studies with highly dire projections have been analyzed and in some cases, largely discredited.

The best example may be one from the automaker-funded Center for Automotive Research that suggested fuel economy averages of 47 to 62 mpg would cost carmakers and consumers from $3,750 to $9,800 per vehicle, thereby slashing U.S. auto sales by half (eliminating 5.5 million sales per year), and destroying a quarter of a million jobs.