Will Tighter CAFE Rules Bring More Trucks, Fewer Small Cars?

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2016 Dodge Dart

2016 Dodge Dart

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The entire auto industry was startled when Fiat Chrysler said two weeks ago it would end production of its Dodge Dart compact car and its Chrysler 200 mid-size sedan.

The company intends to use the plant capacity freed up to build more light trucks, meaning its popular crossover utilities and pickup trucks.

Coverage of the news immediately questioned how Chrysler would be able to meet increasingly high fuel-economy requirements from now through 2025.

DON'T MISS: Chrysler Throws In Towel On Sedans: 200, Dart To Die For SUVs, Trucks

But an article in last Saturday's Detroit Free Press hints at a different way to arrange the puzzle pieces.

What if Chrysler has a better chance of meeting Corporate Average Fuel Economy standards precisely by dumping passenger cars and focusing on trucks?

Here's the reasoning.

2015 Chrysler 200 - 2014 Detroit Auto Show

2015 Chrysler 200 - 2014 Detroit Auto Show

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While the 54.5-mpg fuel-economy average for 2025 got all the headlines in 2012, the regulations are far more complex than a single efficiency number that every vehicle must meet.

(For the record, that "54.5 miles per gallon" also translates to around 40 mpg on the EPA-adjusted fuel-economy part of any new vehicle's window sticker.)

The regulations are graded by "footprint," and smaller passenger cars have a more aggressive ramp (5 percent a year) than larger light trucks (at 3 percent a year).

ALSO SEE: Let's Be Clear: Real 2025 Gas-Mileage Goal Is 40 MPG--Or So--Not 54.5 MPG

Based on its specific mix of sales, every carmaker has fuel-economy numbers for each of many different categories of vehicles, adding up to a unique target for that maker.

But the basic rule is that trucks must increase their efficiency less aggressively than cars.

So a maker that sells mostly cars--take Volkswagen, for example--has to increase the efficiency of its lineup much more, proportionally, than a truck-heavy maker like FCA.

2015 Volkswagen Golf TDI SE

2015 Volkswagen Golf TDI SE

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According to the Free Press, more than 80 percent of Fiat Chrysler's U.S. sales in January were light trucks, including crossovers, minivans, SUVs, and pickup trucks.

Those are eagerly sought-after by buyers these days, with gasoline prices remaining low, while FCA must put larger amounts of "cash on the hood" to move less popular passenger cars.

Added to that is a challenge specific to the company: It must put far higher incentives on its cars, which are not that popular, than other makers do for their comparable products--whereas its trucks, especially Jeeps, fly off the lots.

CHECK OUT: EPA Insider: Agency Bluffed Carmakers To Get CAFE Standards

So perhaps Fiat Chrysler has done the math, looked at the costs of boosting truck efficiency versus passenger car efficiency, and decided that trucks will be cheaper and easier.

During discussion over the CAFE standards for model years 2018 through 2025--finalized in August 2012--several non-U.S. automakers complained bitterly that the difference in efficiency increases for trucks versus cars gave the Detroit Three a huge competitive advantage.

There's probably some truth to that, since both GM and Chrysler had just been through bankruptcies and government-backed restructurings.

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2016 Ram 1500

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But that dispute never really broke into public awareness, unlike the "54.5 mpg" target.

Four years later, the U.S. market has more light trucks than ever. If other makers follow Chrysler's lead, it may see commensurately fewer small, highly efficient passenger cars.

In the end, automakers will build and sell what their customers want to buy. At the moment, it's light trucks.

But the way the CAFE rules are written may be punishing the smallest, most efficient vehicles more than if the playing field had been level.

Talk about the law of unintended consequences.

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