Renault-Nissan Alliance opens Silicon Valley research office
Electrovaya to supply Li-ion systems to Chrysler for 25 minivan PHEVs in 2-year fleet demo project with DOE

Center for Automotive Research calls long-run economic risk to auto industry of mandating permanent fuel economy standards “very serious”; recommends periodic reviews

Plug-in hybrids dominate market penetration in 2025 under CAR scenario IV (62 mpg CAFE standard). Source: CAR. Click to enlarge.

The Center for Automotive Research (CAR) has released a new study estimating the parameters of the US motor vehicle market and industry in 2025, given the “most likely dramatic changes” likely to be soon mandated by the federal government for the purpose of improving the fuel economy performance of vehicles not determined by market forces, as well as additional safety and environmental mandates and regulations.

Based on the results of the study, CAR believes the economic risk to the auto industry connected to mandating permanent fuel economy standards in the long run is “very serious”. The group recommends periodic review to assess the rate of technology development and cost reduction of advanced technologies leading up to 2025.

The CAR report, the US Automotive Market and Industry in 2025, relies on technology and market forecast data from the National Research Council (NRC) and J.D. Power and Associates to project the technology segmentation necessary to achieve anticipated fuel economy mandates in 2025.

The 2010 NRC study, conducted under contract to NHTSA, provided estimated incremental retail cost and performance estimates for more than 40 technologies expected to be commercially available over the next fifteen years. CAR used this study to estimate the likely cost and price impact on new motor vehicles for three different powertrain pathways: spark-ignited; compression-ignited; and electrification.

CAR expanded the three basic pathways to a total of nine pathways, primarily by adding additional extensions for increased mass reduction in the vehicle, further variants of vehicle electrification, and the use of stop/start technology. Each of these nine pathways produced a specific fuel economy standard and cost estimate measured at retail price equivalence.

CAR did not assume any downsizing of the vehicle sales fleet or significant reduction in performance by vehicles in any segment as a means for increasing fuel economy standards by 2025.

CAR researchers used the four fuel economy scenarios developed by the EPA/NHTSA Technical Assessment Report for the upcoming CAFE regulations: 47, 51, 56 and 62 mpg. Each scenario was trended from the 2008 model year fuel economy ratings.

CAR researchers estimated the best (i.e., least-cost) technology mix for each scenario. Using these shared forecasts, each technology’s percent contribution to the fuel efficiency target and weighted cost of implementation, was calculated. The combined weighted cost of implementing each of these technologies provides an average per vehicle cost estimate for obtaining the higher mile per gallon requirement in each scenario. The results for each fuel economy scenario are:

  • Scenario I: (47 mpg CAFE standard, 37.6 “real world fuel economy”); 3% Decrease in CO2: The base case assumes a continuation of the fuel economy increase from the 2010 to 2016 regulation. The 47 mpg target is equivalent to a 70.9% increase from the 2008 actual fleet mpg. The estimated cost of achieving the target is $3,744.

  • Scenario II: (51 mpg CAFE standard, 40.8 “real world fuel economy”); 4% Decrease in CO2: The next scenario represents an average CO2 reduction of 4%, or a corporate average fuel economy of 51 mpg, by the year 2025. The case includes a significant shift toward stop/start, HEV and PEV technology and a corresponding per vehicle cost increase of $5,270.

  • Scenario III: (56 mpg CAFE standard, 44.8 “real world fuel economy”); 5% Decrease in CO2: At a 5% reduction in CO2 emission per year, or a fuel economy of 56 mpg by 2025, the next scenario experienced a major shift to HEV and PHEV technology. Meeting this standard would increase the average cost of a vehicle by $6,714.

  • Scenario IV: (62 mpg CAFE standard, 49.6 “real world fuel economy”); 6% Decrease in CO2: The final scenario of 62 mpg by 2025 represents a yearly reduction of CO2 by 6 percent. The stretch case assumes standards at the high-end of what is currently being considered by the US government. A major shift to PHEV technology occurs as only two technologies, PHEV and BEV, are capable of achieving the targeted fuel economy. Meeting this standard would increase the average cost of a vehicle by $9,790.

CAR then forecasts the US market for light vehicles, the US production of such vehicles and employment in the US motor vehicle manufacturing industry in 2025. CAR uses a simple formula to calculate the economic value for vehicle buyers of higher fuel economy and safety mandates through 2025. The formula incudes baseline price plus the costs of fuel economy technology manufacturing, new mandated safety equipment, charging equipment, and the present value of electricity usage cost, minus the present value of fuel savings at $3.50 and $6.00/gallon US in 2009 dollars. CAR labels this construct as net price.

Effect on US vehicle sales, production and automotive employment of higher retail and net vehicle prices due to higher fuel economy and safety requirements. Miles per gallon/cost per gallon is found on the bottom row. Source: CAR. Click to enlarge.

The lowest net price change CAR found in percentage terms is -2.1% ($606 in extra value to the consumer) at a mandate level of 37.6 mpg in a market with $6.00 per gallon gasoline. The highest net price change is 27.7% ($8,026 in extra cost to the consumer) at a mandate level of 49.6 mpg in a market with $3.50 per gallon gasoline.

To estimate the effect of increases in the net price of new vehicles on new vehicle sales or revenue, CAR estimated the own price elasticity of vehicle demand using an econometric model. This allowed CAR to estimate the effects of higher mandated net prices for new vehicles on sales and vehicle prices in 2025. CAR estimated eight sales and average price levels, one for each fuel economy scenario and fuel price level.

Based on the results, CAR believes the risk connected to mandating permanent fuel economy standards in the long run is very serious. In this study, for example, CAR estimated the potential cost to the consumer of a 49.6 mpg fuel economy standard as well as likely safety technology mandates through 2025. The cost to the consumer of purchasing a motor vehicle would rise by nearly 40 percent and the net cost by 27.7 percent over five years.

As a result, US sales of vehicles would fall by 5.4 million units and US vehicle production by 3.3 million units. Motor vehicle and parts manufacturing employment would fall by 264,500, causing a total employment loss for the US economy of 1.69 million. This loss would happen by 2025 but would start to cumulate with the increase in standards in 2017.

Requirements to downsize vehicles would only increase these loss estimates, as the consumer value of vehicles would be seriously reduced. The average age of vehicles on US highways and roads would certainly rise from its record level of 10.4 years in 2010, since it is assumed that consumers will still have the option of holding on to their remarkably durable vehicles for a much longer period of time. This would reduce the effect of safety and fuel economy mandates, as the replacement rate for operating vehicles would fall to record low levels.

The motor vehicle manufacturing industry is the largest manufacturing industry in the United States. This...will be placed at serious economic risk if the industry is committed by law to the use of technologies that are too expensive or inefficient or to the production of vehicles that consumers do not want or need. That is why the potential cost of a rush by regulatory authorities to mandate permanent, long-run fuel economy standards could be very high in both economic and social terms.

The automotive industry is a high capital cost, long product cycle industry. The 2012-2025 period contains only two standard vehicle platform cycles and one powertrain product cycle at current development rates. These product cycles will cost the industry many tens of billions of dollars; major errors in forecasting technology development and efficiency or consumer acceptance could put a vast investment at risk. This risk includes the potential of a second automotive crisis threatening the very existence of the US motor vehicle industry. Technical progress of these cycles must be continually monitored. If progress does not occur, prices for consumers will rise dramatically and US sales and production of vehicles will fall.

—“The US Automotive Market and Industry in 2025”

Recommendations. Based on its findings, CAR offers a number of policy recommendations:

  • CAR proposes that the EPA and NHTSA, under their current statutory authority, adopt a periodic review process of the proposed and final MY 2017-2025 fuel economy and greenhouse gas rules. The review process would permit the agencies to determine (on an ongoing basis) whether fuel economy and greenhouse gas standards should be adjusted, based on consumers’ willingness to buy vehicles that must comply with the standards, as well as any new developments in technology, costs, safety, fuels, infrastructure and other relevant factors. In addition, the review process would allow the agencies to determine what other developments or policies might be needed to achieve the standards.

  • FE (fuel economy) technology progress must be reviewed on a regular basis and mandates adjusted accordingly to set realistic goals. A permanent NRC/NAS review committee should be formed to monitor real FE technology development; the committee should be comprised of representatives from leading manufacturers, engineering service firms, and government regulators with a role for environmental NGOs and academics.

  • CAR says a new process is needed for the review of technologies, the consumer market and proposed fuel economy standards. CAR further believes this review process should be ongoing, even after the standards have been mandated. CAR recommends a periodic review process be completed every three years. CAR says the need is justified by the many uncertainties existing for the major technologies being considered for improving fuel economy and the equally uncertain prospects for consumer acceptance of these technologies in the light vehicle market. It is important that this review process begin immediately, prior to the NHTSA/EPA deadline of July 31, 2011. CAR proposes that workshops and meetings be organized by NHTSA/EPA without delay.

The risk of permanent, inflexible mandates can be minimized through periodic review. The need for such reviews may, indeed, pass in time as technologies develop and as the market for new products becomes better understood. The review process is available to EPA, NHTSA, and CARB and should be connected to rule-making. The global automotive industry has never been more competitive. Many new technologies will appear and be tested in auto markets all over the world. Vehicle firms operating in the US market will have every incentive to employ these technologies if they are efficient and if there is consumer support. If they don’t employ the technologies, other companies will. A flexible standards-setting process permitting automotive firms to introduce the most valuable product in an era of ever-rising energy prices is the best and surest way of improving fuel economy and reducing emissions in the long run.

—“The US Automotive Market and Industry in 2025”




I hate all this crap.

Just stop all subsidies and let the cost of fuels reflect reality. Stop protecting the middle east pipelines or else send the bill for that to the oil companies.

When the price reflects the real free market we all claim to love so much, there won't be any need to mandate fuel standards because nobody will be able to pay $200 to fill up their car/truck.

What happened to our great American Free Market System???


There is NO such thing as the free market. The closest they came was when they tried to barter beads for Manhattan hundreds of years ago.


ROFLMAO Good point SJC

I love to get into arguments with people who claim that our military is not there to protect oil. Ok, great, then shut down every military base in the middle east. If you want to claim it's for protecting Isreal, then setup a base or two there and get out of everything else.

Why are we paying for all of that? Why are we paying for 75% of the Libyan mess?

We don't have bases in Somalia, the Congo or Darfur or etc etc etc... So don't even remotely start with the garbage about how we're there to protect innocent human life.

We spend a fortune in places that have oil to protect our access to it. What is really pathetic about that is we don't need to. What? Have you seen the Saudis refuse to sell oil to India or Russia or Greece or etc etc etc? Why do we think we need to be there to make them sell us oil? You think whoever takes over in those places wouldn't sell us oil if we'd just get the hell out of there and stop messing in their business? Our money spends just fine and they'll be glad to take it.


"Why are we paying for all of that? Why are we paying for 75% of the Libyan mess?"

Because we are the only superpower left and someone has to do it.. the consequences of a major event stopping the oil flow would be economic chaos for the whole world.. and very quickly other powers would get involved.. just look at the Japan-US relations prior to WWII.. oil

It is obvious the CAR report is self serving and transparent.


The world oil picture could change drastically when Israel starts producing very large quantities of shale oil from their 250 to 500 trillion barrel reserve at about $50+/barrel. USA would have only two friendly countries to protect (Canada and Israel) to get all the oil required for the next 200+ years. Asia and EU could do whatever they want with all the other crude oil sources.

This doesn't mean that USA/Canada/Israel should waste oil obtained from those two huge reserves with overweight inefficient gas guzzlers. Canada and Israel could produce enough oil to choke the whole planet but that would not be very wise. Israel and Canada should set a fair price for shale and tar sands oil, starting at $120/barrel with a $5 to $10/barrel/yearly increase. By 2022 oil would be around $180 to $240/barrel and by 2032 it would sell for a mere $240 to $360/barrel. By 2022 Israel could start paying for all the top grade weapons they need to chase the neighbors away and Canadians could have free just about anything they don't already have.

Americans would be more than happy with two friendly trouble free oil sources.

The next major (American) problem to solve is going to be access to more fresh water. Canada could certainly help if the price is right. A fair price would be 1/10 oil price i.e. starting at $12/barrel with the same relative yearly price increase. Fresh water re-enforced plastic pipeline networks could be built in a few years. All Canadians could spend every winters in USA's southern States to take some $$USD back.

There are easy solutions to all major problems without having to fight oil wars.


DaveD, "I hate all this crap." well put... me too.
Pay off the U.S. debt by taxing gas more. Any time the price of gas falls below $4/gal (e.g.) take the difference and put it toward the natl debt. That would discourage waste, encourage alternatives, and reduce the debt.


1st of all Israel reserves of oil shale are 250 billions not trillions, 2nd there isn't any economical process to extract oil shales to day and nobody has been able to propose a process with a positive EROI to extract oil shale. Last but not least oil shale are not oil there wax than can be a precursor of oil if processed. Mining is out of the table given the size and the depth of the deposit so we are left with cooking the ground at 500C during years to get the oil out of it, good luck with that.


The dichotomy offered is false. If running the huge SUVs and trucks prevalent in the US were more expensive there is plenty of room to downsize, no super-duper highly expensive technology involved.
Of course that is not an answer the American car industry is going to like, hence their argument here.


Treehugger is right, there is no cheap way to produce shale oil today:
"About 1,000 cubic feet of natural gas is burned for every barrel of bitumen produced from an in situ project. After that, another 400 cubic feet is put through a steam methane reforming process to produce hydrogen, which is required to upgrade the bitumen into a kind of synthetic crude that shares the same characteristics of conventional light oil."

I've never seen any process even close to production that could produce shale oil for less than $200/barrel. That could change obviously, but we're not even close right now so shell oil can greatly increase our supply, but you have to ignore the price and the environmental impacts to count it.


The CAR sponsors only support automobiles that have limited lifespans and are replaced as a necessity. Electric propulsion vehicles (PHEV & BEV) have the potential to have useful lifespans of 50% more years and that many more miles driven on average than today's vehicles. These technologies are a threat only to obscene profiteering.

All of the new and elaborate ICE technologies pale in comparison to the fuel economy and emission reduction of matching any ICE to a PHEV drivetrain. Thus, CAR wishes to delay electrification knowing that non-electrified vehicles are substandard in terms of their predictable lifespans. It's all about the MONEY POWER & CONTROL.


I stand corrected. It should have been billions for Israel (250), Saudi Arabia (270) Alberta (179). According to the wise experienced men hired for the Israel shale oil extraction project, the cost will be as low as $50/barrel using local SG, also found in very large quantities. Tar sands output will almost double by 2020 and double again by 2030/2035. The majority will use in situ method instead of open mining.

Of course friend countries like Israel and Canada should get a fair price of at least $120+/barrel in 2012 with a $10/barrel per year increase. By 2022 the going price should be $240+/barrel and a mere $360+/barrel by 2032. Israel could then pay for all the top weapons they need to get neighbors away and Canadians could afford all the goodies they do not already have, including extended winter vacations in southern States etc.

USA would no longer have to fight oil wars, for at least another 200+ years.



You're sill assuming that anyone can produce a barrel of tar sands oil at $120/barrel. I don't think that is possible today.



"Because we are the only superpower left and someone has to do it "

I don't agree. We don't have to be the worlds cop, we just have to buy the oil from whoever is selling it. It would be much cheaper and the price of oil would reflect what it really costs.

Right now, we're covering the cost for keeping the whole world's supply steady. Wasteful for us, and it just PI$$ES off the rest of the world for us to throw our weight around. How many Islamic terrorist would care if we even existed if we weren't over there involved in all this mess?
How much money could we save if we didn't have to spend hundreds of BILLIONS of dollars on Homeland Security every year? How much if we didn't have to spend half of the money we do on our standing military? How bout the three wars we're in and by the way....we're starting to bomb Yemen!!! Oh yeah, that's what we need, another war!!!

That all comes straight out of our economy.


They seem to use CO2 as a metric when increasing mileage from 20 mpg average to 30 mpg average has obvious benefits in reducing imported oil, which should be our goal.


Don't raise gas tax, just mandate Nanos and scooters for all travel.

People will immediately just say, "Screw this, I'm staying home".

Problem solved.

Raise taxes (some more) and pay all the union auto workers to stay home. Those who invested in GM, Ford and Chrysler? they're out of luck (Like "just what part of 'redistribution of wealth' do you NOT understand, capitalist pig").

Cuba does fine with no free market, let's get with it.


They seem to have come to a conclusion and then looked for some facts to support it. That is a typical conservative distortion.


The largest segment of the funding for Center for Automotive Research (43%) is from entities that have little fiscal discipline – federal, state and local governments which spend OPM (other peoples money).

Distortions, typical of big government influence might exist.

CAR Revenue Funding Sources as of March 31, 2011
Federal Gov’t . . . . . . . . . 30%
Conferences . . . . . . . . . 28%
State/Local Gov’t . . . . . . 13%
Affiliate Contributions . . . 10%
Foundations . . . . . . . . . 7%
Corporate . . . . . . . . . . . 5%
Associations and Other . . 7%

Stan Peterson

No in the corrected post, Harvey D is correct. Shale oil can be produced for about $60 dollars per barrel in studies I have seen from the Willsiton/Bakken and Eagle-Ford oil plays.

It only goes to show how truly greedy the Oil Sheiks and Oil Commisars have been. No oil 'Robber Baron' ever was that greedy, as they had to concern themselves with competition and sales volume. Plus there was no expectation that time was short for them. Today's Oil Shieks and Oil Commissars have more meoney and power than they know what to do with, but they do not believe the gravy train will last long for them.

An assassins bullet or a Revolution is the likely endpoint, and they all recognize to "Get it while the getting is good."

The comments to this entry are closed.