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

 
5 1,407 views Apr 25, 2008
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New U.S. CAFE rules mean more expensive cars, fewer sales

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

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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.



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Comments (5)

  1. By Gus Posted: 4/25/2008 3:50pm PDT

    Well, duh.
     
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  2. By Roy Posted: 4/25/2008 7:15pm PDT

    It's just as well that the automakers are massively overestimating the costs to themselves. Now if they would just stop whining about it and get on with it, maybe they'll actually do something better than the imported brands for a change and not spend the next thirty years catching up.
     
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  3. By mr.ed Posted: 4/26/2008 8:45am PDT

    The market is demanding higher efficiency, finally faced with escalating fuel and environmental costs. The mfr's will have to modernize and innovate, or die. CAFE rules will be seen to be a joke, years behind reality. The politicians are typically reactive. Customers want proactive, and they'll go to the suppliers that are.
     
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  4. By Gus Posted: 4/26/2008 10:20am PDT

    Everyone seems to be forgetting that it was the foriegn companies that were playing catchup when it came to devoping the highly profitable SUV's and large pickup trucks from not that long ago...
     
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  5. By chris Posted: 4/28/2008 11:42am PDT

    dont worry gus, the foreign brands make a mistake and people forget about it, but when we screw up, well.. it will take 20 years to live that one down.
     
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