The CAFE Gap

Edward Niedermeyer
by Edward Niedermeyer
the cafe gap

Automotive News (sub) has a headline that the industry will likely latch onto as it continues its PR campaign to beg for federal funds to offset coming increases in CAFE requirements. And there's little denying the Global Insight research that says that CAFE compliance will cost American automakers considerably more than their Japanese counterparts. The Detroit three can expect to pay some $30b bringing its fleet up to the 31mpg average mandated by 2015, while Japan's big three will pay only about $14.85b to meet the standards. That's less than GM alone is expected to pay, according to Global Insight. The "fast start" 2015 goal is blamed for much of the expense, as it allows little flexibility for product planning, mandating a short-term 25 percent jump in efficiency, to be followed by a total 40 percent improvement by 2020. But wait, that still doesn't explain why Japan's companies can expect to pay so much less for CAFE compliance than Detroit. Is currency manipulation saving the Nipponese bottom line? Secret manufacturing techniques? Did someone hire Godzilla's lobbying firm? Actually, the reason comes in the form of a single-sentence paragraph. "Japanese automakers won't be hit as hard because their fleets already are more fuel efficient." How is that fair?

Join the conversation
4 of 31 comments
  • RobertSD RobertSD on May 25, 2008

    This is just funny. The reason it will cost Honda or Toyota so much less is that only about 30% of either's sales are minivans, trucks, CUVs, SUVs, etc. Ford and GM are about 70% CUV, SUV, truck, minivan, etc. The CAFE average of Ford and GM's car fleets is not that much different from Honda (Toyota is different because they have the Prius). The CAFE average of Ford and GM's truck fleet is lower because they sell 4x-5x as many full-size trucks as Toyota (Honda doesn't have any). Why? Because that's what they're known for - that's what they're good at. It is almost all mix. Ford's CAFE for cars in 2010 will probably be 31-32 mpg with the Fiesta and Fusion hybrid. With 4-cylinder Ecoboost engines comoing and additional hybrids in the works, I imagine hitting the 35.5 CAFE for cars won't be hard.... remember CAFE is not EPA mpgs. It's about 30% higher. But their "truck" line will kill them. And that's because when people need a capable and dependable truck, they turn to GM or Ford for their F-150s/Silverados/Sierras and their HD lines, which will be included in CAFE in 2012. That need for full-size trucks won't die. It will languish a little, but will never die, and Ford and GM will also dominate that market. Ford's introduction of the EcoBoost, diesel lines and their pending import of the EcoSport from Brazil (not clear if it will be named that or Bronco - or if Bronco is another one altogether) will probably still not be enough to raise their CAFE 30% on the truck side in 6 years. Ditto GM.... It's all mix.

  • "scarey" "scarey" on May 25, 2008

    Update- I checked out the Toyota, Ford, Chevy, Dodge, and Nissan sites last night. Toyota, Ford, and Chevy have cheap (relatively) small pickups available with 4 cylinder engines and 5 speed manual trannies. Dodge and Nissan are priced several thou above the others. My next vehicle will be a Chevy, Ford, or Toyota SMALL pickup. Woo-hoo !

  • Nino Nino on May 26, 2008

    The fact remains that in the US, most people equate the size of a car with prestige. Any manufacturer would be stupid if they didn't acknowledge this trend. Even today with the price of gas setting record highs, I hear from many people that they are willing to pay the price as long as they are able to drive their bigger, "safer" cars. The words, "I'm not driving some small shitbox" usually follows. Until this kind of attitude changes, any company that gambles on bringing out a well-equipt small car, is taking a major chance on it flopping. This is true no matter how well-equipt or how well built the offering is. If it's a hatchback, the risk triples.

  • CommanderFish CommanderFish on May 27, 2008
    .... GM, Ford et al scream that small cars are unprofitable. So how has Japan got away with it all these years? Chrysler makes a profit on their compacts. But yet all of you here already consider them dead, so that doesn't matter to you.