New U.S. CAFE rules mean more expensive cars, fewer sales

The U.S. Secretary of Transportation couched the new CAFE plan as saving billions of gallons of fuel, but the industry sees it as one that will costs billions in research, development and manufacturing costs over the next five years.

Secretary of Transportation Mary Peters noted in the announcement of the new regulations that the Department of Transportation (DOT) estimates a savings of 55 billion gallons of fuel and cut 521 million metric tons of carbon dioxide emissions.

Automakers will foot the bill - though it will certainly be passed on to the consumer - for the savings, however. Over the next five years, at least $47 billion will be spent to comply with the CAFE standard, the vast majority being spent on pickup trucks - $31 billion. General Motors will be hardest hit - despite its Saturn Aura and Chevrolet Malibu hybrids - shouldering $17 billion worth of the burden, with Ford and Chrysler next at $7 billion and $6.3 billion, respectively, reports The Detroit News.

Still, all of the United States' major auto makers are confident they can achieve the CAFE requirements, but also caution that it will result in more expensive vehicles. Increased prices will almost certainly mean fewer sales, as some consumers will simply be priced out of the market, likely resorting to used car purchases instead.

The lower volume of sales will make it even harder to recuperate the massive investment, and the cycle could potentially become a vicious one. The NHTSA thinks sales will fall by almost 150,000 units in model year 2011, and as many as 550,000 fewer sales by 2015 - a decrease of nearly 5% based on current sales figures.