Asian Brands Complain That New CAFE Rules Favors Trucks, Detroit

When the White House opened negotiations over the next round of CAFE regulations for 2017-2025, I reckoned the automakers and regulators were “working in nearly unprecedented harmony.” Well, not so much any more. The WSJ [sub] reports that, although work on “the big number” is proceeding well, in the words of IHS Automotive’s Michael Robinet

This becomes a lot more politically divisive as they become much more specific in terms of the footprint of the vehicle.

In short, the original sin of CAFE, the two-tier system that drove SUV “light truck” sales and saw the creation of “trucks” like the PT Cruiser and HHR, has returned to haunt the latest round of negotiations. And, according to the WSJ, Japanese and Korean manufacturers are complaining that the new rules will motivate consumers to buy less-efficient offerings, and in turn give the Detroit manufacturers an unfair advantage. The kumbayas are over, and the gloves are off… but just how unfair are the newly-proposed rules?

It’s been said that only a handful of experts truly understand the details of CAFE compliance, with its complex system of footprint-based categories, formula and credits. But, according to The WSJ, the basic problem brought up by the Asian automakers is as follows:

Historically, U.S. fuel-economy requirements, while intended to push auto makers to build more fuel-efficient cars, instead helped spawn the SUV craze of the 1990s as U.S. auto makers pushed more of their fleets into the “light truck” category where rules were more lenient.

Now, however, auto makers must hit targets both by segment and for their overall U.S. vehicle fleets, with standards tied more closely to a vehicle’s size. The new standards being floated by the Obama administration—which would roughly double the fleet target to 56.2 miles a gallon by 2025—revise the scale that determines targets for each vehicle segment.

A small SUV such as Honda’s CRV, for instance, would need to improve fuel efficiency by several miles per gallon in 2017 model-year vehicles, and then make smaller additional improvements every year until 2025. The biggest trucks, such as some of Ford’s F-Series pickups, won’t face an increase until 2020. After that, they would need to make improvements every year through 2025. The bigger the truck, the more time will be allowed for auto makers to improve miles-per-gallon figures.

Because the proposal is still being negotiated, that’s as detailed as we can get for now, but it’s clear why the Hondas and Hyundais of the world aren’t happy with these broad strokes. More to the point, because every MPG of improvement in vehicles with the worst fuel economy save more fuel than the same improvement in a more-efficient car, the Asian brands have a point when they argue that this approach is counter-productive. After all, the Obama Administration’s stated goal is “saving families money and reducing dependence on oil.” So why go easy on the light trucks, which have the highest consumption levels?

Federal regulators are looking to give more leeway to larger trucks because they feel those vehicles required greater improvements than their smaller counterparts in the last round of changes to fuel-economy regulations, two people familiar with the administration’s thinking said.

The debate is still wildly ambiguous, based as it is on complex formulas that have yet to be publicized. But with automakers and regulators meeting daily now to push out a new standard, we should have a better sense of the direction things are going in the coming days and weeks. But because the government still partially owns GM and Chrysler, expect a strange coalition of environmental groups, foreign-based automakers and anti-bailout Republicans to push hard against any perceived attempt to favor Detroit in the new regulations. After all, trucks and SUVs, not to mention Detroit’s historic dependence on them, are highly-charged symbols of inefficiency and uncompetitiveness. Stacking the deck to keep trucks cheap and thirsty, if indeed that’s what this proposal does, will not be looked kindly upon by history.