Obama Administration Gets Win On New Mileage Standards In Deal With Automakers

The Obama Administration gets a win on auto emissions and CAFE standards. The new standards will push the CAFE (corporate average fuel economy) standards from 27 mpg to 54.5 mpg by 2025.

While the American carmakers, as well as their Asian rivals, once argued against even minimal increases in government fuel rules, they are acquiescing without protest to an increase to 54.5 miles per gallon by 2025, from the current 27 miles per gallon.

The new standards are seen by the Obama administration as critical to reducing oil consumption and cutting consumer expenses at the pump, and the White House made it clear to Detroit executives that the changes were coming and they needed to cooperate.

This should seem cut and dried as a bonus for reducing fuel consumption and reliance on energy sources from unstable parts of the world, but things aren't nearly as cut and dried.

For starters, the actual fleet fuel economy will end up being much lower - the EPA fuel economy for individual cars can differ from the CAFE standards by as much as 20%, which means that the actual improvement isn't nearly as much as it seems at first blush (but still a major improvement in fuel economy).

The Environmental Protection Agency estimates that the rules will save drivers $8,000 per vehicle and reduce oil consumption by 2.2 million barrels a day, or about half as much as the nation currently imports from OPEC nations.

Corporate Average Fuel Economy (CAFE) figures like these aren't calculated using the familiar EPA fuel economy numbers seen on new-car window stickers.

EPA figures are adjusted to reflect real-world driving and are typically about 20% lower -- indicating worse fuel economy -- than the figures used to calculate CAFE compliance. For instance, a car that gets 21 mpg according to the EPA window sticker might count as a 27 mpg car for CAFE requirements.

CAFE regulations are jointly administered by the National Highway Traffic Safety Administration and the EPA.

While most major automakers voiced support for the plan, not all are enthusiastic.

Expect pushback on the issue of cost and how much this will add to the cost of vehicles purchased and how many fewer cars will be bought in coming years as a result of the regulations.

Some of that may be justified, but it also means that the car makers have to focus on getting more fuel efficient vehicles on the road and to strive to improve fuel economy - not just pay lip service to it.

Until now, the automakers have consistently pitched horsepower and 0-60 times or carrying capacity to separate their vehicles from the pack. The fuel economy standards will now put fuel economy into the mix and require the automakers to devote much more energy to developing higher efficiency vehicles.

What I want to see is how the companies incorporate the plug-in/hybrid vehicles into the mix, and how they are calculated for fleet purposes.