By on August 6, 2014

2015 ford fiesta se ecoboost front 34

The federal fuel efficiency mandates now in place to guide automakers toward a fleet average of 54.5 mpg by 2025 may curb United States auto sales after 2018, according to a leading economist speaking during the 2014 Management Briefing Seminars in Traverse City, Mich.

Automotive News reports National Automobile Dealers Association chief economist Steven Szakaly warned that the challenges associated with the new CAFE targets were severely underestimated by the industry in comparison to previous CAFE targets.

He says that while automakers are currently experiencing a resurgence in sales with “good profits” on large vehicles, such as pickups and SUVs, future sales past 2018 will pale in comparison — with little hope for avoiding those losses — as automakers focus more upon the 2025 CAFE target:

Unless gasoline prices rise significantly, or we see consumers becoming irrational and everyone buying an electric car, it’s tough to think of consumers willing to pay $3,000 to $7,000 more for the exact same car, just because someone in Washington, D.C., or California says they need to buy it.

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21 Comments on “Szakaly: CAFE Targets Will Curb US Auto Sales Beyond 2018...”

  • avatar

    Ha. I already feel this way. What’s the average new car price now? Over $30k? And I swear the new stuff drives no better. Or at least not better enough to justify the price. I don’t care much for the new doo dads either. I’ve driven some of the new stuff. But my superbly maintained 6-8 year old cars I have now still put a smile on my face and are very nice to ride in.

    This prediction doesn’t surprise me at all.

    Only way I see this not coming true is if the public continues its trend of willingness to take out 8+ year car loans. Shop monthly payments instead of looking at the price of the vehicle. My $0.02.

    • 0 avatar

      Most people already shop payment instead of price. I see leasing increasing as a percentage of sales, as well as longer loans.

    • 0 avatar

      So you’re saying it WILL come true.

    • 0 avatar

      Cars today cost the same as they did 10, 20, 30 years ago, or less, once you factor in inflation. Cars aren’t more expensive; Joe Sixpack just isn’t making as much money.

    • 0 avatar

      The average price is over $30,000 because buyers are using extended credit terms to upgrade their purchases.

      They’re buying more car than they need because the lower rates and longer terms push down the monthly payments. Most new car buyers are payment buyers; price is a secondary consideration.

  • avatar

    With these estimates of price increases needed to cover the additional costs of higher fuel economy, it always seems like they think it is going to be a sudden huge jump in prices. That’s not how it works. manufacturers raise sticker prices and freight charges every year in smaller increments. Its like boiling a frog. When I first started selling Hyundais, a nicely equipped automatic Elantra was around $16k before rebates (we were selling them for around $12k during the worst of the recession). Now a new auto Elantra is over $19k and can hit $20k easily with a couple extra options. The fuel economy is better, its larger, there is more safety equipment standard, so there is some value in the price increase over time. People adjust to the new reality.

  • avatar
    heavy handle

    “$3,000 to $7,000 more for the exact same car”
    There’s the big fallacy. It’s not the exact same car. You can’t make the same model for 20 years anymore, the market is just too tough.

    In other words, that 3-7K is the cost of updating platforms, which will happen regardless of any legislative changes. All the new legislation does is ensure that new platforms are safer, cleaner and more economical than the platforms they replace, which hasn’t always been the case in the past.

    It’s like your local building code. You may adopt the affectation that you don’t care if your house is a fire trap, but your right to live in a fire trap stops when everyone else has to clean-up after you. You may not care if your new car is a gas guzzler and gross polluter, but that doesn’t mean everybody wants to chip-in to fight unnecessary wars or breathe dirty air just to please you.

    • 0 avatar

      “… but that doesn’t mean everybody wants to chip-in to fight unnecessary wars or breathe dirty air just to please you.”

      There’s this ongoing liberal non sequitur that regulation is a binary condition and that any let up in their continual addition of new and more onerous ones will cause American society to revert to the robber baron days with rivers afire and birds falling out of the sky.

      I seem to recall the air being just fine in 1995 much less 2005. I don’t seem to recall any wars over oil either. What imaginary country did you live in where that wasn’t the case? Is there any chance that you and your fellow travellers could go back there?

      • 0 avatar
        heavy handle

        1995 is 35 years after the start of significant US automotive emissions regulations (mandatory PCV in California), so I guess you agree with my point. If you can remember 20 years before that (before unleaded and catalytic converters), the air wasn’t “just fine” in most cities, and everybody paid an economic cost.

      • 0 avatar

        +1 Dan. Air quality regulation was good. Now it is out of control. The same is true with most other vehicle regulations.

      • 0 avatar

        @Dan – and what were the real reasons behind Gulf War #1 and Gulf War #2?

        • 0 avatar

          Since the Iraqis were allowed to negotiate their own oil field contracts, and since the majority of said contracts went to China, oil wasn’t the real reason. If that was your intended implication.

          • 0 avatar

            What does “fungible” mean to you? To me it means you’re either in denial or … Less than brilliant.

  • avatar

    Have we grown used to $4.00/gal gasoline in this country? What happened to the outrage when it hit $3.25 days after Katrina?

    CAFE will not reduce sales. It will just result in the unfortunate death of the hatchback and wagon.

  • avatar

    CAFE is too unpredictable to forecast sales. If CAFE regulations are strictly enforced in their current guise, the car market will be turned on its ear by 2025. Vehicles will cost more and sales will probably slump. However, CAFE is not a done deal. The 2022-2025 regulations are classified as augural, signifying that some legislation must be issued, but that the standards must follow the de novo provision in the law. Last I checked, the 2022-2025 standards are not finalized, nor is their passage a formal matter of congressional procedure.

    Manufacturers also receive special EPA credits for ecological A/C refrigerant and systems like start stop. The manufacturers can lobby the EPA to recognize other technologies (I think MB lobbied EPA to recognize the ecological benefit of their paint). Electric vehicles and hybrid pickups also earn credit-multiplier status, which could be extended to encourage alternative technology.

    If the augural standards are modified or the EPA issues ecological credits liberally, the CAFE standards will be considerably lower than their published figures. I’ve seen several forecasts, predicting that CAFE will be about 10% lower than the published figures (36mpg EPA fleet-wide average).

  • avatar

    Am I the only one not making my “shocked” face that someone who works for NADA is saying that CAFE will cause gloom and doom? Doesn’t mean he’s right or wrong, but the fact that he said it is hardly newsworthy.

    Nice quip about consumers needing to “become irrational” before they will buy an electric car; as an economist, I’m sure he can envision any number of circumstances under which consumers might decide that buying an electric car advances their best interests, i.e. is “rational,” either now or in the future. Tesla’s in-house retailing division must not have paid its NADA dues this year.

  • avatar

    They may WANT to charge more, but I’m betting they won’t – because they know they’ll lose sales to whoever is willing to sell for less. The companies that lose overall in this sort of game are small ones like Mazda, and more niche providers like Volvo.

  • avatar

    So, the head of the dealer’s association thinks they know more than the automakers do? This would be the same dealer’s association that does consumer-friendly things like “protect” us from direct sales? The same one that fights tooth and nail against any law that might make dealers less shady? Those guys? Yeah, totally trustworthy.

    I trust the engineers at the automakers, which seemed pretty cool with the latest CAFE targets.

  • avatar

    I don’t feel the doom and gloom. Cars today are oversized and overpowered. A car with today’s technology but with ’90s era size and performance will easily surpass whatever CAFE standards might exist. Just reigning in some of the idiocy that is light trucks will accomplish much of it anyway, and that is finally starting to happen. And they will sell just fine.

    Personally, I think café is stupid and a realistic gas tax would be a far better way to accomplish the same goal, but reality is reality.

  • avatar
    Mick White

    Fuel cells should be encouraged by the enthusiast community.

    They would also be great for sports cars and muscle cars (wait for it…) because range extension with a ~17kg fuel cell could nearly double the highway fuel economy, while still maintaining the engine/transmission of choice for acceleration and ‘track’ purposes. Can’t wait until they can also run off the same fuel as is already in the ICE vehicle’s fuel tank. Petrol/diesel/gas fuel cells exist, and they are coming down in weight and cost.

    The DOE estimates that mass-produced fuel cells should cost $30/kW. A small auxiliary /modular fuel cell for highway use should eventually be cheaper (as a CAFE-centric solution) than continuous downsizing and boost increases.

    Having a small Solid Oxide Fuel Cell for highway cruising would allow the ICE to have reduced complexity (would not necessary for future BMW ///M cars to downsize to a 1.0L quad-turbo to get outstanding highway fuel economy).

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