SAUL YOUNG/NEWS SENTINEL Charles West, president of West Chevrolet at the West Chevrolet's West Fleet Service center Tuesday. Federal Corporate Average Fuel Economy mileage standards will increase to 56 mpg by 2025. West is hoping that companies will hold on to their commercial vehicles longer as the increase in fuel economy in vehicles will also add to the price.
Car dealers can see much stricter mileage requirements coming down the road and they are wondering what the impact will be on sticker prices and auto sales.
Charles West, president of West Chevrolet onAlcoaHighway, is worried about costs that new Corporate Average Fuel Economy (CAFE) standards could add to new autos — up to nearly $10,000 by at least one estimate — and he is hedging his business bets by putting more focus on providing service for customers who might decide to hang on to older vehicles rather than buy new ones.
"I hope it doesn't become like it was in Cuba after Castro, and every vehicle was made in 1959," he joked.
West, a fourth-generation member of the family that started the dealership 80 years ago, has tried to track the status of the CAFE standards, but said it's difficult because they are being developed in parts by different agencies, such as the National Highway Traffic Safety Administration, Environmental Protection Agency, U.S. Department of Transportation and the California Air Quality Board.
"I don't know what is going to come out of Washington and no one does, but we think the future cars are going to be more expensive, maybe have less pulling capacity because of the fuel efficiency standards. So with that logic, we just feel that a lot of businesses will be keeping their trucks in service a lot longer than they used to," he said.
However, Lance Cunningham of Lance Cunningham Ford on Clinton Highway said there is no need for dealers or consumers to panic about the effect the CAFE standards will have on new car prices. The important thing to remember, he said, is that the standards apply to fleet averages. For example, the 56 mpg standard that manufacturers will be expected to meet in 2025 for passenger cars would be an average of the mileage achieved across the range of passenger models the manufacturer produces. A manufacturer could still meet CAFE standards by focusing on meeting or exceeding the standards on one or two models to make up for other models that don't, he said.
CAFE requirements may mean that extra costs will go into the models the manufacturer decides to focus on to meet the standards and that will probably mean the dealer's margin on that model will be slimmer, Cunningham explained.
That, coupled with the fact that cars with higher fuel economy still are not in as high demand in Knoxville as larger vehicles or trucks, means dealers will be less likely to bargain over the price of the higher-mpg vehicles, he said.
Drivers Phil McGee, left and Bob Stewart demonstrate a scenario showcasing the new Ford Intelligent Vehicle Technology that the car company is developing, at Chilhowee Park on Monday, Oct. 24, 2011. The advances will allow vehicles to talk wirelessly with one another, in hopes of reducing crashes and traffic congestion. (AMY SMOTHERMAN BURGESS/NEWS SENTINEL)
Cunningham said technological developments have even been improving the mileage of trucks and other heavy vehicles. He believes the car industry will accommodate the CAFE standards and the market will sort itself out.
"There is no way that cars will be priced out of the range of the customers," Cunningham said. "The manufacturers cannot let it happen."
While other agencies are involved, NHTSA is spearheading development of the CAFE standards. At the request of the Obama administration, NHTSA and EPA in July released a proposal to extend the national program for improving vehicle fuel economy through the 2017 to 2025 model years.
According to a report released by the NHTSA, the average industry fleetwide combined car and truck mileage standards would increase from 34.1 mpg in 2016 to 49.6 mpg in 2025.
Average fleetwide mileage for passenger cars would increase from 37.8 mpg in 2016 to 56 mpg in 2025. For light trucks, it would increase from 28.8 mpg in 2016 to 40.3 mpg in 2025.
The report noted that NHTSA is proposing a slower rate of mileage improvement for trucks to help manufacturers maintain the towing and payload capabilities of those vehicles.
NHTSA also released examples of fuel economy targets for various popular vehicle models in 2025. This includes 61.1 mpg for the Honda Fit, 54.9 mpg for the Ford Fusion, 48 mpg for the Chrysler 300, 47.5 for the four-wheel-drive Ford Escape, 43.4 for the Nissan Murano, 39.2 for the Toyota Sienna and 33 mpg for the Chevy Silverado.
The proposed standards would apply to passenger cars and light trucks, including subcompact cars to large sedans and station wagons, crossover utility vehicles, sport utility vehicles, minivans and pickup trucks.
AMY SMOTHERMAN BURGESS/NEWS SENTINEL Ford representative Mary Wroten helps describe new Intelligent Vehicle Technology that the car company is developing, during demonstrations at Chilhowee Park on Oct. 24. The advances will allow vehicles to communicate wirelessly with one another, in hopes of reducing crashes and traffic congestion.
The proposal has the support of 13 automakers, the state of California, the United Auto Workers, environmental groups and consumer organizations. After considering public input, the agencies intend to make a final decision on the standards by July 31.
The government anticipates a host of benefits for these fuel economy improvements. The vehicles involved make up about 60 percent of U.S. petroleum use and greenhouse emissions. The improved fuel economy is projected to save drivers more than $1.7 trillion at the fuel pump, or about $8,000 per vehicle, by 2025. This is expected to reduce the country's dependence on oil by 12 billion barrels and by 2025 reduce consumption of oil by 2.2 million barrels a day, which would offset about one fourth of the country's current level of foreign oil imports.
The fuel economy improvements also are projected to cut 6 billion metric tons of greenhouse gases by 2025.
"The standards will rely on innovative technologies that are expected to spur economic growth and create high-quality jobs across the country," according to the NHTSA report. Some technologies already being explored include advanced engines and transmissions, vehicle weight reduction, lower tire rolling resistance, improved aerodynamics, diesel engines, and improvements in air conditioning.
As the federal government puts the CAFE standards into place, more automakers are incorporating technology into new models. The upgrades run the gamut from hands-free cell phone communication, global positioning guidance systems, tires systems that are flat resistant with automatic inflation, automatic parking capability and advanced security systems to sophisticated audio/visual components.
Also separate from the fuel economy issue, cars in the years ahead may be required to carry safety equipment such as an accident-avoidance system that Ford Motor Co. now has under development.
The system uses short range signals between vehicles to sound warnings and alert drivers when a collision is imminent. The system, which has global positioning equipment, sends a signal out about 900 feet, 360 degrees around the car at a rate of 10 times a second that communicates with other vehicles within that range also equipped with such a system.
Drivers still must respond to avoid collisions, but the system can detect many traffic situations before the driver would become aware of them.
Ford held a demonstration of the system in Knoxville last month in the Knoxville Zoo's parking lot. Mary Wroten, a Ford accident avoidance expert, said the system would need to be installed in all vehicles to be effective. Ford is working on the system to present to the Department of Transportation, which will consider whether to call for its use in all vehicles, she said.
"We are working with eight OEMs (original equipment manufacturers) on the technical side and nine OEMs on the policy side, along with the U.S. DOT, to try to get this to market in the most optimal way," Wroten said.
She said she could not estimate a cost for the system, but it would be less expensive than current systems that use cameras and sensors. To assure the system is effective, Ford also will have to develop a way that it can be retrofitted to older cars.
The Center for Automotive Research, a nonprofit organization spun off from the University of Michigan that does auto industry research, released a study in June that dealt with the proposed new CAFE standards and other possible mandates including safety features, and concluded these could add costs that could price cars out of the range of many buyers.
The study, "The U.S. Automotive Market and Industry in 2025," used a baseline price of $28,966 for a new light vehicle, and estimated that achieving fuel economy of 37.6 mpg would add $3,744 to the price of the vehicle, achieving 40.8 mpg would add $5,270, achieving 44.8 mpg would add $6,714 to the price and getting 49.6 mpg would add $9,790 to the price tag. On top of these figures, CAR estimated new safety features would add another $1,500 to $3,000 to the price, based on a list from the Alliance of Automobile Manufacturers of anticipated NHTSA safety mandates.
All totaled, the CAR study estimated fuel economy and safety mandates could add between $5,244 and $11,290 to the cost of a 2025 car.
NHTSA cost estimates differ considerably from the CAR study. Using an algorithm to calculate the additional costs for manufacturers to bring their fleets in line with CAFE standards for different years, NHTSA figured the maximum added to the cost of a passenger car in 2025 would be an average of $2,018 and the maximum added to the cost of a light truck in 2025 would average $3,829.
Ford is developing new Intelligent Vehicle Technology which they demonstrated at Chilhowee Park on Monday, Oct. 24, 2011. The advances will allow vehicles to talk wirelessly with one another, in hopes of reducing crashes and traffic congestion. (AMY SMOTHERMAN BURGESS/NEWS SENTINEL)
Again, the CAR and NHTSA mileage figures deal with fleet averages, and as long as manufacturers meet the averages, they do not have to apply the mileage standards to all models they produce.
Regardless of what figures one accepts, West said it is obvious the price of vehicles is going to go up and this was a factor in his dealership launching a new venture in January.
Using an empty building behind his dealership on Alcoa Highway, West opened a 27,900-square-foot facility called West Fleet Service to handle maintenance of fleet vehicles. With its staff of three, the operation can service anything smaller than a tractor-trailer rig, said Doug Reynolds, its manager.
Business has been good, with about 900 vehicles serviced in a year and service agreements established with Five Star Food Service, Krispy Kreme, Dale Insulation and Second Harvest Food Bank, Reynolds said.
"As a result of owners holding on to their vehicles longer, more maintenance will be required, and that's one of the key reasons we opened West Fleet Service this year — to meet the increasing service demand of fleet and heavy-duty vehicles of all brands," West said in a statement.
John Bell, development director for Second Harvest, said the CAFE standards are a concern, but only indirectly. The nonprofit organization, which has 16 trucks of various sizes, does not buy new vehicles, but relies mainly on grants to purchase used ones.
"We have always held onto our vehicles as long as we possibly can," he said.
If the standards add greatly to the cost of new vehicles, that could make it harder for Second Harvest to buy used ones.
"Anything that increases vehicle cost will make it harder for us to get grant money," Bell said.
© 2011, Knoxville News Sentinel Co.
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