Three big myths worth busting for consumers when it comes to fuel economy standards

Fuel economy policies have been on the books since 1973, but misconceptions about how the policy works persist. Overall, increasing fuel efficiency is good news for consumers since it reduces how much money is spent on gasoline. But automakers sometimes talk about the standards in a way that implies consumers will lose out. Below, we address three common myths about fuel economy standards.

Myth #1: Automakers can’t comply with fuel economy standards if consumers buy lots of SUVs and trucks

Fact: Fuel economy standards are flexible and adjust based on consumer choices.

The standards require automakers to produce cars and light-duty trucks that get more miles per gallon over time, but what a lot of people don’t know is that the actual requirement for each automaker varies by the type and size of vehicles they sell.

For instance, cars have an average requirement of 45 mpg by 2025 while larger vehicles like trucks and SUVS have an average requirement of 32 mpg by the same year.

MPG targets vary within each category as well – large cars have lower targets than small cars and the same goes for trucks and SUVs.  Here are a few examples below:

                                                       *based on calculations from the 2012 final rule

Compliance is based on the fleetwide average so no single vehicle has to be “in compliance.” Automakers can still be in compliance even if certain vehicles go above the standard while others fall below it.  But the examples above provide an idea of the scale of improvements automakers need to make across their fleet. As you can see below, automakers have regularly exceeded the requirements for cars and trucks.

Just like there are weight classes in sports, there are size classes in fuel economy policy to account for the different mileage performance we can expect from different size cars, trucks and SUVs.

The overall average fuel economy that is achieved does depend on the fleet mix – the proportion of trucks and cars consumers buy. In 2012, based on vehicle sales at the time, the government projected the average fuel economy achieved would be approximately 54.5 mpg. However, in recent years, people have been buying bigger vehicles as gas prices have fallen. So the government’s updated projection of the average fuel economy achieved is slightly lower and could change again depending on what consumers buy over the next several years, even while manufacturers stay in compliance with the original size-based standard.

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Unfortunately, some in the auto industry conflate these points, by stating that companies would have to force consumers to buy smaller cars to comply with the rules. But that just isn’t true.

Chris Grundler, a high-ranking EPA official who oversees much of the agency’s work on fuel economy standards recently told the Wall Street Journal that he wanted to “bust this myth.” As he put it, “These standards were deliberately designed to preserve consumer choice. This is not a compliance problem.”

Myth #2 Fuel economy standards require automakers to sell a lot of EVs and hybrids, which is impossible with low gas prices.

Fact: Fuel economy standards can be met largely with improvements to traditional gas engines.

Automakers have many choices when it comes to compliance–greater electrification and hybridization is certainly one of these choices.  However, the federal agencies’ technical analysis suggests that improvements to traditional internal combustion engines would be sufficient for achieving the bulk of compliance. In fact, they reported that the technological improvements necessary were already available and being deployed today at much greater levels than they originally anticipated.

Further, they projected that for many automakers, electric vehicles sales will remain low – on the order of 2 to 3 percent – with similar levels of market penetration for plug-in hybrids. Full hybrids like the Prius are expected to become more prevalent, on the order of 3 to 14 percent of the vehicle mix. Meanwhile, “mild” electrification such as regenerative braking and stop-start systems are expected to become much more common.

(Source)

But before agencies published their assessment of the status of technology deployment, the Auto Alliance claimed that full hybrid sales would have to climb to 47 percent. As you can see above, that isn’t the case. Nonetheless, some automakers insist that the standards will put them in the position of trying to sell cars consumers might not want. In reality, the standards simply require automakers to make the cars consumers are already buying more efficient.

Myth #3: Fuel economy compliance costs are too high and will hurt consumers. 

Fact: Thanks to lower fuel consumption from fuel economy standards, most consumers will see net savings in their first month of ownership.

The latest official estimate for compliance costs to meet the MY 2022-2025 fuel economy standards is similar to or lower than the 2012 estimate (that automakers agreed to). The benefits and savings from improved fuel economy outweigh the costs in the very first month of ownership for the average new vehicle buyer. And the EPA and NHTSA report found that advanced engine technology and other improvements to gasoline vehicles are already in the market at rates higher than they expected than when the rules were proposed in 2012. The prevalence of these technologies means that the cost of meeting these standards is projected to be lower than originally expected.

Assuming that increased costs are passed on to consumers, vehicle price impacts are estimated as follows:

(Source)

These costs are more than offset by consumer savings on gasoline, as indicated by research by Consumers Union, the federal agencies, and others. Note, too, that the numbers below are based on paying cash up-front for a vehicle. In practice, most people finance new cars, which spread the increased vehicle cost over the life of the loan, while the gas savings a consumer enjoys are immediate:

(Source)

You’ll note that these numbers are all lower – far lower – than $5,000. But oddly, the Auto Alliance recently told the Detroit Free Press that meeting these standards would cost them that much more per vehicle. They also said that according to their surveys, only 7 percent of consumers would want to pay that much for a vehicle. Thankfully, they won’t have to, but it’s odd to see the Auto Alliance use numbers that don’t correspond to what the actual policy would require them to do.

To be fair, the Alliance also asked people if they’d be willing to pay $2,000 or less for a more efficient vehicle and 70 percent of consumers said yes.

That’s more realistic and it’s more in line with our own survey research.

According to our own research fuel economy policies remain very popular. And consumers are also more satisfied with vehicles with better fuel economy.

So while there’s plenty to argue about when it comes to exactly what future fuel economy standards should look like – there are a few basics that should not be up for debate: 1) the standards already account for shifts in consumer demand, 2) the standards can largely be met through the types of vehicles people are already buying, and 3) the technologies needed to meet the standards cost a lot less than the fuel they save.

On that much, at least, we should be clear.