Gas-Mileage Rules To Add $3,000 Or More To Car Prices By 2025?

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You most likely know by now that fuel efficiency is slated to double in new vehicles by 2025.

What you may not know is how much that will cost you when you buy a new car in future years.

Thousands of real dollars

The EPA has long estimated that a new vehicle will cost about $3,000 more in real (inflation-adjusted) dollars in 2025 than the same vehicle would in 2012.

Now former GM product czar Bob Lutz has weighed in, saying at the Society of Automotive Engineers 2013 World Congress that he thinks the real cost is "on the way to" $5,000.

In his keynote speech, quoted in The Detroit News, Lutz said,  "If the government says $1,800, it'll probably be about double that" by the time new vehicles reach showrooms.

The rules for 2017-2025 that were finalized last year will raise car prices $1,726 on average, while a truck will rise $2,059.

On top of that, there are additional costs for the 2012-2016 rules, agreed to in 2009, that are already being implemented.

Fuel savings much greater

While the average new car now sells for more than $30,000, those increases remain substantial.

Either way, though, the higher cost is far outweighed by the savings in fuel it will provide over the car's lifetime.

Going from, say, 20 mpg to 40 mpg in a car that travels 15,000 miles a year, burning gas at $4 a gallon, saves $15,000 over a 10-year period.

But retail buyers consistently put more importance on initial purchase price (or monthly payment) than on the lifetime operating cost of a new car, even if it costs them money in the long run.

That's why the National Automobile Dealers Association (NADA) was one of the few groups to lobby aggressively against the new rules: Car dealers worried that certain potential buyers wouldn't be able to afford more expensive cars.

42 mpg on window sticker

Under new rules adopted last year by the U.S. Environmental Protection Agency and supported by most (but not all) automakers, corporate average fuel economy (CAFE) will rise to an average of 54.5 miles per gallon across all vehicles.

Because CAFE is measured differently than the EPA gas-mileage ratings, that translates to about 42 mpg on new-vehicle window stickers.

It should be noted that the global auto industry is extremely good at squeezing costs out of mass-produced, highly reliable, complex electromechanical systems and new technologies.

And the industry has a long history of crying wolf over the dire effects of any new regulation, starting with seat belts and working up through emission controls, crash-safety standards, and many more.

Still, there's little doubt that new gasoline and diesel cars will really cost more in real terms as they get more fuel-efficient. (Plug-in electric cars, meanwhile, will slowly come down in cost.)

Is the tradeoff worth it? Are CAFE regulations the right way to improve efficiency and reduce both fuel consumption and vehicle emissions?

Leave us your thoughts in the Comments below.


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Comments (28)
  1. They will just need to make the cars electric, or ER-EV, or hybrid. It will pay off. I have saved $7,000.00 in 2 years in my Chevy Volt in gas and maintenance. Take Care, TED

  2. Current purchasers of vehicles like the Chevrolet Volt and Nissan Leaf are really becoming aware of the overall reduced operating costs of these vehicles. My payment on my Volt, when adjusted for energy savings, tax credits and maintenance costs will be ultimately no more costly that driving a conventional power train car, possbily cheaper. The affordability of cars generally is driving young people out of the market already and financing has radically changed over time. While troubling, the costs are not a deal breaker if cars become more efficient.

  3. Yes. CAFE standards work. We have much more fuel efficient cars because of them. GM enjoys huge sales and great profits from the Chevy Cruze. A high mileage gasoline car that they would not make if not forced to. Automakers historically just don't like being told what to do. They reject the fact that they have a public responsibility to make a less harmful product. The gasoline automobile may be the most harmful consumer product every made. We need automakers the make the best cars that they can. Plugin electric cars are the best cars you can buy by far. GM, Lutz and all most all the automakers know this but dare not say it out loud as they fear disparaging their highly profitable gas cars. We live in the schizophrenic auto marketing times.

  4. It is not the government’s job to pick winners and losers in the economy. The market drives (or should drive) the economy, not the government. Not many factors are left to realistically improve the current automobile. We can all drive tear-drop shaped autos, but that would be pretty lame. Engines and exhausts have been cleaned up as much as realistically possible. The industry is currently pushing the limits of materials as far as reducing weight. Materials are the only factor that has room for improvement. If the government continues to tighten the noose on auto industry, the industry will go where we don't want them to go...composites. The price of cars will go through the roof because of composites.

  5. The East Germans (post Hitler of course) waited years for a new Trabant (the government chosen winner) because of slow manufacturing production built into the socialist model of government... If composites are integrated in any significant amount, people will be waiting years to be able to afford a new car or a car loan will look more like a mortgage. The problem with government is it doesn’t just stop at fixing a problem. It keeps on looking for real or contrived problems to justify its existence, and we suffer for that.

  6. Be it $3k or $5k or whatever, it costs real money to make ICE cars more efficient. All this will help the price competitiveness of plug-in vehicles even more.

  7. Ha… "Fuel EfficiencyGas-Mileage Rules To Add $3,000 Or More To Car Prices By 2025?"

    Lets see, 2025 is 12 years into the future… what will gas prices be?
    Remember (flash-back 12) to 2000 when gas prices where near $1/gal vs. $4/gal over this past year!

    At 24 MPG (12-15,000 miles per year) means average car uses 500-650 gallons per year. What if gas costs $8, or $12 per gallon? Our choices are a combination of… MPG, miles driven, and type of fuel.

  8. Edison2's Very Light Car is designed to be complaint beyond 2025 regulations today, at typical market prices, estimated around $20k-$30k, gas up to full electric.

    There would be no waiting to save money. That savings would begin moment a buyer drove off the lot. On a gasoline-only version, it would sink in at the first re-fill when the pump stops at 5 gallons.

    EPA/NHTSA are right, operational costs are lower, but "compliance" cars need to sell at certain volumes in order to bring fleet CO2/MPG within compliance because compliance is calculated at the end of the production year. It makes more sense to do this with vehicles that offer savings the moment you start driving vs. 4-7 years down the road.

  9. $3k is NOT much when a Navigation system cost nearly that much few years ago.

    Plus, @ $4/gallon, $3k is only about 750 gallons. If you drive 12,000 miles per year. A difference between 25MPG and 40MPG is 180 gallon/year. 4.2 years to break even. So, I don't see a reason why that $3k is a big deal... It should be a no brainer....

  10. "But retail buyers consistently put more importance on initial purchase price (or monthly payment) than on the lifetime operating cost of a new car, even if it costs them money in the long run."

    Just stop. Market better then.


  11. What a crock!! If done right and if big auto has proven time and time again, it won't, the price of the lighter, thus less power, battery, etc needed to do this MPG goal wil cost less, not more.

    Of course they are right if they keep doing things the same way it'll cost more but they won't be able to afford the gasoline at $12-15/gal in today's $ even at that 54mpg.

    So something has to change. Either big auto does or they fail again.

    In 10 yrs you'll see the emergence of composite uni-bodies far stronger yet 50% lighter and less costly to make. This because it cuts all the other weight except payload, cuts their costs 50%.

    Lithium battery materials refined are only about $80/kwhr so by 2022 they will cost about $175/kwhr.

  12. Continued,

    A Rav-4 size vehicle done in composites would only weight 1500-2000lbs that with good aero , EV drive, 100 mile battery range and a 10hp, 30hp if used to tow a trailer, fueled of your choice, unlimited range generator.

    On the generator alone it would get over 100mpg and on electric, 200mpge.

    Sadly this has been doable for 40 yrs yet no one has prodyced them. Though GM built at least 1, the GM Ultralite and the Toyota 1/X. Either is very economical, practical with the only change needed other corporate thinking is using medium tech composites instead of the CF they used to prove it was too costly.

  13. @Jerry: No question the technology exists. But what makes you think that a company like Toyota, which produces about 8 million vehicles a year, could produce those technologies at the same cost as the steel body + ICE that has 100 years of refinement behind it?

    There's no question that vastly more fuel-efficient vehicles can be produced. The point is more that they can't be produced for the SAME PRICE as today's cars.

    If you have data or studies or expert projections showing that they can be built at the same cost as today's cars--which would, btw, contradict the EPA's own estimates--please share them. I'd like to see them.

  14. Hi John, My 40 yrs in the composite business says I can build a composite body/chassis as low cost if not lower than a car company can build a steel one. And be 2x's as strong. And if I can others should be able to also.

    I have one already with tooling so have a excellent idea of cost. Which OEM for a 2 seat all composite sportwagon with hood, doors, etc parts about $1200/car set.

    This takes under 10 man/hrs to do in low production. In mass production 1 manhr. Medium tech composites about $2/lb OEM and my examples weighs 235lbs. Feel free to do the math on the actual costs. It's just not much.

    I'll do better and build some.

    Nor is mass production in big numbers a problem. The only problem is big auto doesn't like change.

  15. Continued,

    So yes these if they wanted to they could do at as I said at not only lower cost for the unibody, etc, but also savings of 30-40% on the rest of the drivetrain, motor, battery saves far more from being 50% less weight.

    But likely they can't change as history shows so well it'll be newcomers to do it.

    My data comes from my shop which has already done it.

    I'll have limited production of some later this yr as way too much profit to pass up.

    Even if composite bodies were 2x's as expensive the weight savings would make far larger saving in the other car parts, especially if battery driven.

    I've been cofounding experts for decades them telling me I can't build things yet I do and those things work fine.

  16. @Jerry: Impressive claim.

    You're saying, if I can paraphrase, that today you can build composite structures of automotive quality, at automotive volumes (tens to hundreds of thousands a year), that will pass current and projected crash-safety standards--for the same materials, equipment, and staffing costs as existing high-volume steel car structures?

    Tell us a bit more about your shop. What composite structures do you build today, for what kinds of customers, and in what volumes?

    I'd agree with you, by the way, that the auto industry tends to dislike change. Especially when it doesn't clearly offer them ways to get consumers to buy highly profitable add-ons to the basic car.

  17. @John,

    Jerry is correct. It has been proven for decades by the Kit Car industry.

    Regarding "change"... most industries want stability. A lot of money is tied up in tooling and equipment. Who wants to lose their investment? This was demonstrated when a former GM engineer produced a better spark plug but would require re-tooling of the existing equipment some 8 years ago. It was a pass by the industry.


  18. I have a very small shop and just recovering from health problems so having to do things slowly.

    I have an all composite 2 seat sportwagon that 2x's as strong as steel yet half the weight at 235lbs would be about 500lbs in steel. It includes the doors, hood, etc composite parts in that too as made at the same time in the same mold so they fit, the biggest problem building bodies in any material.

    Yes it can be made in any quantity you want just by making faster production lines. Since the body/chassis, doors, hood are made in 20 minutes and include paint, etc that metal ones need both materials and manhrs are less and cost of the production line 5% of a metal body line, coating/paint shops, robot welding, metal presses, etc.


  19. I'll likely produce a 2wh Streamliner first trying for better safety than a compact car because I can do it at low cost.

    My only competition is the $80k E Tracer which I can build far better at 40% less weight and 60% less cost.

    After I make some money from that I'll do my 2 seat sportwagon which I already have most of the production tooling for.

    I do them for myself but so many have asked to buy them.

    Since my vocations are electrical/electronics and custom, production composites, aero/hydrodynamics it was a natural fit for me.

    As a designer I'll design, build them, the production lines and sell them off for others to produce long term once going concerns as I have other fish to fry too.

    My goal is 100 local car factories.

  20. Another Federal Regulation the Taxes "We the People". Time to reduce the size, regulatory authority and Power of the EPA.

  21. @Ken: Because the free market has been historically so successful at reducing air pollution?

    Emissions are an "external cost" that no one had to account for--or remove--but that affect everyone. And you'll find that while many Americans purport to dislike "Gummint" and all the bad things they're told it does, they tend to like and support things like cleaner air, cleaner water, and reductions in heavy metals. Check the opinion polls and survey data.

  22. To power cars, let's compare an internal combustion engine to an electric motor. The latter is quiet, instant torque responsive, produces no local emissions, ultra-low maintenance, and approximately 400% more fuel efficient making the proposed gas-powered car mileage numbers seem like a joke. My advise...let the ICE die of natural causes and put the money into EV's which will dominate the roads in the not too distant future.

  23. Maybe we can make law more air bags ? curb weight you know . . . here's a thought - maybe we can make them cheaper ?
    DIY to stop making gas, only electric cars. CA would luv them. An e-car for the real masses.

  24. What if fuel efficient vehicles actually cost $5000 less to buy than the average car today?

    The Prius costs $24,200 today and the average person is spending $30,000 on a new vehicle. So you can save money by just making a more rational choice.

  25. I'm surprised that Voelcker didn't apply his own rule to this one.

    The Voelcker Rule says "People will buy the largest most luxurious vehicle they THINK they can afford."

    Under the Voelcker rule, the more efficient cars will not cost the customer any more money, because they are going to buy the most car they can afford no matter what.

    The result...less leather and more hybrid technologies in the car that is purchased.

  26. Hey John, I suppose I might not ever see an article from you on adding a 'fee' to a gallon of gas to reflect the true cost, including wars to protect Middle East oil fields, and the costs of health care for the wounded soldiers in said war, current and future costs of global warming, added health care costs for respiratory related illness because of the burning of oil, etc.

    It's 'sweep the rest of the facts under the rug' time.

  27. @Del: Find me the elected official who proposes to add such a fee to reflect some entity's estimate of externality costs to consumption of hydrocarbons, and I'll happily cover it.

  28. If no elected official ever does here (they do in Europe), it's because many have been intimidated by the oil lobby for years, for one. And there is very little public pressure since journalists as well, fail to point out the elephant in the room-- time after time.

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