By on March 25, 2015

Who mugged Toyota? Picture courtesy cafepress.com

In Silicon Valley tech parlance, the acronym “WFIO” stands for “We’re F***ed, It’s Over“. When it comes to the Corporate Average Fuel Economy requirements imposed by the Obama administration in 2012, it’s increasingly looking like that scenario is playing out, as the “nudge” meant to get consumers into more fuel efficient cars has given way to increased purchasing of trucks and SUVs.

On the one hand, CAFE standards have led to some truly astounding innovation. Without it, we’d have never seen a 700 horsepower muscle car capable of hitting low 20 mpg figures on the highway.

But that doesn’t outweigh the rest of CAFE’s negative points. In theory, CAFE is ostensibly a series of regulations design to raise the fuel economy of new vehicles sold in the United States. In practice, it is a farce. Vehicles like pickup trucks, which are most in need of increased fuel efficiency, are either exempted outright, or subject to lax standards. On the other hand, small passenger cars, which already tend to be efficient, must meet extremely stringent targets that is expected to make them significantly expensive in coming years, further diminishing their affordability for consumers and their profitability for auto makers.

Some observers suggest that this is intentional: Detroit auto makers make literally all of their money on large trucks and SUVs, while import manufacturers do so with smaller passenger cars. The current setup favors the home team while hamstringing the import brands. There are other incentives that are equally perverse, like allowing small cars to be re-classified as “light trucks” to help shore up the auto maker’s fleet average (their main target), as well as endless loopholes, credits and other instruments that allow car companies to game the system – and in Tesla’s case, keep themselves afloat while they struggle to remain profitable. The rise in turbocharged engines is also directly attributable to CAFE. These engines essentially “teach to the test”, performing well on fuel economy tests but providing abysmal real world mileage.

Even much of the auto world’s current styling trends are driven by CAFE. It’s no coincidence that every sedan on the market has adopted the “reverse teardrop” shape. It’s the most shape most amenable to enhanced fuel economy, and helps compensate for the high, blunt front ends that are required to meet crash safety standards.

It’s not hard to make the case for CAFE being, at best a poorly crafted bit of big government legislation and at worst an outright scam. There have been rumblings about a review in later years, especially if a GOP administration occupies the White House in 2016. But it’s looking like the marketplace may do the heavy lifting.

Low gas prices and a nascent economic recovery (as well as rather lax auto lending practices among many auto makers) has led to a boom in new vehicle sales. Pickup trucks and SUVs have been leading the way, in a marked reversal from the 2008-2012 period where sales of gas guzzlers trailed off and consumers demanded smaller, more fuel efficient vehicles. To their credit, auto makers responded with unconventional speed, providing a host of compact cars capable of previously unheard of levels of fuel efficiency at competitive prices.

Unfortunately, they haven’t always been met with such a warm reception. The highly acclaimed Ford Fiesta was brought out in response to the economic crisis of 2008, when oil shot up to $147 a barrel. But sales have consistently disappointed and the car has been a money-loser for Ford, even though it’s built in Mexico. The next generation will be imported from Thailand in a bid to make the car less of a hit to Ford’s bottom line.

On the other hand, Ford’s F-Series, GM’s four pickup trucks and the new lineup of Ram trucks have all been enjoying strong sales. Pickups, CUVs and SUVs are replacing mid-size sedans as the American family hauler of choice. At the same time, hybrid vehicles, electric vehicles and diesel engines are marginal players in the automotive market, thanks to their relative expensive, lack of economic payback and a significant move downward in gas prices. It all adds up to a massive, consumer driven middle finger to the entire CAFE regime.

Publicly, the people behind CAFE are on board. One Department of Transportation official promised to incorporate the current state of the market in the scheduled CAFE review that is currently underway. The same official said that the target is “not solid ground”. But despite the consumer friendly words, CAFE has consistently shown a bias towards top down, technocratic solutions that are designed with the legislator and the auto maker in mind.

If the bureaucrats behind CAFE are having a “WFIO” moment, then we ought to help, erm, nudge them towards a good decision for all of us. We don’t need to scrap CAFE – after all, we wouldn’t have the SRT Hellcat without it – but we do need a radical rethink of the way we measure fuel economy standards, both in terms of individual vehicle tests and a fleet average. Like the often-proposed simplified tax code, there should be a minimum amount of loopholes and credits, and an enhanced emphasis on transparency.

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68 Comments on “Editorial: Here’s A Four Letter Word For CAFE: “WFIO”...”


  • avatar
    jmo

    “We don’t need to scrap CAFE”

    Sure we do and replace it with a $2/gallon gas tax.

    To hell you say, abolish both. But, between CAFE and fracking we’ve really put the screws to Iran, Venezuela and Russia. I’m all for the free market but we also have geopolitical enemies that need to be dealt with and low oil prices are far more productive than wars at keeping our enemies in check.

    In terms of economic efficiency, the gas tax is vastly preferable but very difficult politically so we get the hack known as CAFE.

    • 0 avatar

      IMO a gas tax would be preferable. Let the people who are driving guzzlers pay for it.

      • 0 avatar
        PrincipalDan

        High gas tax = suddenly everyone in the Tea Party would be driving manual transmission 1.0 lt. Fiestas. ;-P

      • 0 avatar
        Pch101

        A significant gas tax increase in the US is a political impossibility, and is therefore not a practical option.

        • 0 avatar
          mike978

          At the Federal level it is, but at the state level it is possible. PA increased its gas tax last year and this year (1st Jan) and had a GOP Governor, House and Senate. North Carolina is increasing its gas tax and also has a GOP Governor, House and Senate. A Federal approach would be preferable but if most states increase either gas taxes then the end result would be comparable.

          • 0 avatar
            Pch101

            Those are tiny increases at best. Nothing compared to the taxation situation in Europe or Japan; US fuel taxes aren’t even on par with Canada.

          • 0 avatar
            mike978

            Agreed they are small, but a step in the right direction and having several 10c increases does start to add up over time. But as stated a Federal rate increase would be preferable.

          • 0 avatar
            Pch101

            These substantial tax increases are just not going to happen. You may as well suggest that we achieve world peace by having the Easter Bunny negotiate with Vladimir Putin.

            In the real world, politicians have to deal with real world limitations. It is not possible to have a realistic discussion without accepting that it is a non-starter and therefore not worth talking about. Otherwise, it’s just an internet forum fantasy that provides little more than entertainment value.

          • 0 avatar
            Lou_BC

            I have to agree with Pch101. Even though taxes would have a greater effect on driver behaviour than CAFE it will not happen because there isn’t a politician in a democratically elected system willing to commit the electoral equivalent of Seppuku.

            CAFE exists in its form due to the fact that everyone knows that large pickups and SUV’s are where the money is at. The political right does not want to hurt big business and the left does not want to hurt big labour.

      • 0 avatar
        Hummer

        Or we could stop picking favorites, axe the gas tax and Cafe, and send every one with a drivers license (no matter number of vehicles owned) a bill each month for road use charges, don’t pay, your license isn’t valid.

        No tracking
        No childish “let’s make others pay” mess
        Fair for everyone.
        No EV taxing issues
        No loss of funds with less consumption

        • 0 avatar
          jmo

          How does you plan allow us to put the economic screws to our enemies?

          • 0 avatar
            Hummer

            We have that in place, we have your own oil when the ME wants to act up. Otherwise we use their oil until they’re back fighting with limited funds.

          • 0 avatar
            jmo

            “We have that in place”

            Thanks to CAFE. Without CAFE what is your solution?

          • 0 avatar
            Hummer

            How can you possibly credit CAFE with that?
            Having our own resources availible at a moments notice is a far better safety net than acting like America is the worlds police, or that our consumption is even an issue as we watch Asia come online.

          • 0 avatar
            jmo

            “How can you possibly credit CAFE with that?”

            Gas prices are low because of three factors.

            1. Fracking
            2. The Saudi’s trying to maintain market share in the face of that fracking
            3. CAFE and the resulting increased fleet fuel economy reducing us domestic oil demand.

            If you pull out #3 – what do you propose to replace it with so we can continue to put economic pressure on our enemies?

          • 0 avatar
            Sigivald

            “How does you plan allow us to put the economic screws to our enemies?”

            How about “it doesn’t, and the cost to *US* is worse than the cost to them, in this plan”?

            “Hey, let’s cripple the US economy by making energy super expensive! It’ll hurt Russia a little by making us use less oil!”

            No. That’s cutting off your nose to spite your face.

        • 0 avatar
          Sigivald

          Problems there:

          1) Licensed doesn’t mean actually driving; someone who basically never drives should pay the same amount as someone who drives all day every day, for road use?

          2) Road wear (Use charge means maintenance, right? Otherwise it’s damned hard to justify to the electorate.) relates to vehicle weight more than anything else.

          Existing fuel taxes actually do a pretty clever job of at least roughly correlating vehicle mass and wear to cost, which is their good point.

          (And since we ain’t ever getting privatized roads, I support a fuel tax that *actually goes to road maintenance and construction* as the least-stupid alternative for keeping them working.

          Well, that and “removing road tractor exemptions from taxes”, which at least some states – Oregon, where I live – have.

          Yep, it’d make transport more expensive.

          Yep, it’d mean people actually paid for the road wear their transport consumption caused, directly.)

      • 0 avatar
        dash riprock

        Also think of the carbon emissions saved as tens of thousands of Canadian vehicles will no longer be idling at the border waiting to fill up in the US

    • 0 avatar
      RonaldPottol

      How about we automatically raise it every October or so? With gas prices generally falling then, it will be less noticeable.

      At best, CAFE was an ugly hack.

  • avatar
    Dan

    “On the one hand, CAFE standards have led to some truly astounding innovation. Without it, we’d have never seen a 700 horsepower muscle car capable of hitting low 20 mpg figures on the highway.”

    CAFE was untalked about, untouched, and essentially toothless from 1983 to 2006, apparently an automotive dark age when no innovation took place. Crediting it for much beyond the 1-4 shift lockout is a considerable stretch.

    • 0 avatar
      Sigivald

      Well, I’ll give it at least partial credit for hybrids and improved aerodynamics.

      Of course, “people like paying less for fuel every month” is a factor even without CAFE; just not as big of one as our Betters in Washington want it to be.

  • avatar
    mitchw

    Without decades of “Chicken Tax” trade protection for their trucks, one wonders how profitable Detroit would be today. Rumors of the current trade talks including said Chicken Tax in the negotiations should give relief and hope to capitalists across this great nation.

    I love the smell of America in the morning.

    • 0 avatar
      DenverMike

      The Tundra, Titan, Frontier and Ridgeline are equally “protected” so what gives? The Mighty Max, P’up, Raider, Ranger, Dakota, D50, BRAT and others were equally “protected” too, so what gave??

    • 0 avatar
      Pch101

      Actually, the chicken tax led to more variety. Ford and GM responded to the closing of the cab-chassis loophole by making their own compact pickups in the US, leaving Mazda and Isuzu to continue to sell their own Japanese-made trucks with their own branding.

  • avatar
    PrincipalDan

    Amen. The whole set of regulations and the toughest regs being on the vehicles that are low selling compared to something like a crew cab pickup truck make this (as my Grandmother would say:) “Bass Ackwards.”

  • avatar

    While you were busy getting 100 miles per gallon and hypermiling your Priuses… I was busy supercharging HEMIS…

    I want to change it to “YFIO”

    Cause “I” was never involved with your downfall.

    • 0 avatar
      SunnyvaleCA

      Well, that’s part of the problem with CAFE. It doesn’t address the issue that if CAFE were effective people adjust their lifestyle to take advantage of low fuel prices by consuming even more fuel elsewhere. Sometimes the fuel is indirectly consumed… extra flying, running home appliances that could instead be used less frequently, living in ridiculously hot parts of the country were A/C is on practically year ’round. Or, in your case, supercharging HEMIs.

      The use of energy in this country is much more closely tied to economic activity and the price of that energy. We kind of want the increased economic activity (given that our entire wellbeing is based on a pyramid scheme of ever-increasing consumption), so that just leaves higher prices for energy if we want to prod the country as a whole into consuming less of it.

  • avatar
    vvk

    People buying whatever is cheap. I am currently leasing a $40k CUV for under $160 per month, including tax. Nothing down, all fees rolled into the monthly payment. Try to lease a small car in the same price bracket for under $400 per month with nothing down. They are throwing unbelievable money on the hood to move these trucks.

  • avatar
    danio3834

    “We don’t need to scrap CAFE – after all, we wouldn’t have the SRT Hellcat without it”

    That’s a bit of a stretch. The car exists in spite of, not thanks to CAFE. CAFE made for a strong business case against the car in the planning phase.

  • avatar
    Sam Hell Jr

    As Derek rightly intimates, there’s more at work here than just gas prices and economy regulations. The roads have gone to hell, crash standards mean cars have to be tanks, and traffic situations in areas with any kind of population density continue to worsen … which I think has had the weird effect of making people just demand cars which are more comfortable, connected, even productive places to pass the time.

    Meanwhile Boomer car buyers want something with easy ingress/egress, and Gen X and Gen Y buyers need big back seats and trunks for kid stuff and the little space capsules they call infant car seats now. Plus, you know, we’re fat. So, so fat.

    If you’re wondering how they deal with this is Europe, the answer is, not well. Those who need cars but can’t afford big ones just sit ass-to-elbows and suffer.

    But the NA market is going to demand big wagony things and trucks until it is not financially feasible to do so. Could pretty much everybody on this continent, and in America especially, size down a class or two in capacity and engine size? Sure. Will they, in present financial conditions? Nah.

    • 0 avatar
      DenverMike

      When given the same choices, under the same conditions, what market/consumers wouldn’t do the exact same? And Europeans are just as fat, last I heard they were more so, just less proud of it.

  • avatar
    thelaine

    If they elimated CAFE it would be “We’re Free It’s Over.” Let consumers buy what they want and let car companies compete for their business. The Japanese killed it in the 70s and 80s by offering consumers reliable and fuel efficient cars. It had nothing to do with government. All the government did was restrict imports of these great cars with “voluntary” coerced agreements.

    Pollution and safety regs make sense until they get ridiculous, but government programs, once begun, never seem to end. They just metastasize. They should have to constantly prove they are essential or they should be eliminated.

    CAFE is just another employment program for people who believe they know better and want control and politicians who trade favors, all paid for by taxpayers. It should have been scrapped long ago.

    • 0 avatar
      Sam Hell Jr

      If you scrapped CAFE, the next politician who needed some enviro donor dollars would be campaigning to replace it with something at least as counterproductive and probably even more expensive within the hour. Anybody with compliance experience in any heavily regulated industry will tell you: better the devil you know.

  • avatar
    J.Emerson

    In principal, I agree that the US would be better off with a higher gas tax to reduce consumption, and a general re-configuring of CAFE standards to limit potential cheating. However, I think you underestimate the extent to which tax increases are political poison in the United States. CAFE represents the most politically viable option for increasing fleet fuel economy. And despite the loopholes, it has worked pretty well overall, with minimal cost to consumers.

    Also, the refrain that CAFE and regulation are going to make cars more expensive has gotten very tired at this point. The real price of cars has been falling for at least the last three decades. Besides, isn’t that what a big chunk of the B&B wants anyway? Cars to be more expensive so that the subprimes and the unworthy can’t afford them.

  • avatar
    harshciygar

    Spoken like a true armchair politician.

  • avatar
    redav

    “Vehicles like pickup trucks, which are most in need of increased fuel efficiency, are either exempted outright, or subject to lax standards.”

    And those trucks have gotten much better efficiency over the last few years, too.

    • 0 avatar
      bunkie

      +1

      And, since they use a lot of fuel (and are so damned popular), even small increases in mpg numbers tend to have large effects on total fuel consumption.

      • 0 avatar
        Sigivald

        Yeah, my ’94 Toyota pickup (the Magical Small Pickup Of The Past!) … got 20mpg loaded. Maybe 21-22 unloaded.

        A new full-size gets that kind of fuel economy, while being more comfortable and more capable (if harder to park).

        “Most in need”, well … let the buyers decide that, eh?

        • 0 avatar
          Lou_BC

          True. my 1984 Ranger 2.8 litre V6 reg cab got around 25 mpg highway. My 1990 F250 got 15 highway. My 2010 F150 SuperCrew gets 20.5 mpg if I’m gentle. My 2010 has 100 hp more than my F250. At least double the hp of my 1984.
          You factor in seating for 6 and multiple safety features along with superior reliability over anything from those 2 decades and I wonder why one would want to stray from the current course?
          Improved safety,mpg, and durability DOES cost more money but my standard of living is better because of it.

  • avatar
    burgersandbeer

    You have an odd fixation with Silicon Valley jargon. WFIO is a new one to me.

  • avatar
    slance66

    CAFE is a poorly thought out, poorly implemented overly bureaucratic mish mash. Just like every other federal regulatory scheme. A gas tax more effectively produces the officially desired result, but it does so with a tax that is certainly not progressive. Don’t go thinking that a gas tax stops anyone from buying a Range Rover Sport or $50k F150, but it hits the guy driving an old beat up Explorer pretty hard.

    One this is clear: Americans don’t want small cars. They are happy to drive roomy cars that get decent mileage. The Accord, Camry, Fusion, and all the small CUVs are pretty decent and keep getting better. Even trucks have gotten much better.

    • 0 avatar
      DevilsRotary86

      “One this is clear: Americans don’t want small cars.” I know what you are saying, so I will simply remind you not to paint with so broad of a brush. Some Americans like me, my wife, and my brother prefer small cars.

      But yes, I agree. Most Americans don’t want small cars.

  • avatar
    eggsalad

    (WRT Fiesta) “the car has been a money-loser for Ford, even though it’s built in Mexico.”

    Maybe you should change “even though” to “because”. I won’t buy a car built in a third-world country.

  • avatar
    stingray65

    CAFE was enacted as a response to the Arab oil embargo of 1973 and fears we were running out of domestic oil. As it turned out those scary predictions were wrong, but once a government program is in place it is very difficult to get rid of it, even when the original reasoning disappears. Remember the 55mph speed limit was also supposed to be temporary, but wasn’t removed until the late 1980s under Reagan, and under great protest by the safety nazis in NHTSA and the DOT.

    • 0 avatar
      PrincipalDan

      Um the National Speed Limit Law wasn’t repealed fully until 1995. But you keep thanking Ronnie for that…

      • 0 avatar
        Sigivald

        But per Wikipedia: The NMSL was modified in 1987 and 1988 to allow up to 65 mph (105 km/h) limits on certain limited access, rural roads

        Those modifications were under Reagan (though I don’t think he should be credited as The Mover, because Congress – I can find no mention of him especially supporting or pushing the reform), and “interstates outside of cities” was the most obvious and important reform anyway.

        It’s fair to say the 55 limit was removed in ’87/’88, though I can’t stand the normal practice of mentioning the President’s name when the President is irrelevant.

        (Whereas we can fairly *blame* Nixon for the imposition, because he pushed the idea, even if it did also require Congress for enactment.)

        • 0 avatar
          PrincipalDan

          lol – well the power wasn’t given back to the states until 1995. I only mention it because those who invoke the name of Reagan are usually doing it from a “small government conservative” standpoint. They want the states to hold all the cards.

          Thanks for mentioning Nixon, today he’d be too socialist for the Republicans, B. Clinton would be too conservative for the Democrats, and Obama would be to the right of Nixon.

          • 0 avatar
            Lou_BC

            IIRC Montana the great state of drive as fast as you f–in want officially did that in 1996. I was there is 97 and enjoyed every minute of it.

            We do have to remember that the Repubs see Reagan as a deity who saved the USA and the world from those godless Commies.

            They currently do not have a “great White Hope” so nostalgia for the “good ol’ days” is to be expected. .

  • avatar
    pdl2dmtl

    So many good ideas / solutions, so little time. He, he…
    I liked that one with the bill sent by mail to every driver. If the drivers do not pay the dues and the driver licenses are void, I can only imagine the police filters on every highway to catch the “fraudsters”.
    Talking about police state…

  • avatar
    Master Baiter

    I’ll just point out as someone else did on another thread that you don’t have to drive to benefit from roads and transportation infrastructure. If you’re an elderly shut-in and someone delivers your meds by van, you’ve just benefited significantly from the roads.

    No reason they can’t be funded by the state income tax; interstates from general federal taxes.

  • avatar
    kosmo

    Nothing makes the government happier than hearing citizens clamoring for higher taxes.

    They bought it! More money for The Clubhouse!

    Higher gas tax, carbon tax, tax for driving into Gotham, etc., etc., etc..


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