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Customer LoginsMid-term evaluation of US fuel economy and emissions standards suggests 54.5-mpg is a guideline
While the draft mid-term Technical Assessment Report (TAR) suggests the industry may not reach a corporate average fuel economy (CAFE) of 54.5 mpg in 2025, the report is largely supportive of the progress and direction of the existing standards.
The US Environmental Protection Agency (EPA), National Highway Traffic Safety Administration (NHTSA) and California Air Resources Board (CARB) released their Draft Technical Assessment Report (TAR) on July 18, which lead to several media reports suggesting that the agencies might be stepping away from the expected 54.5 mpg average fuel economy target for 2025 model-year vehicles, set in 2012. The report does suggest the industry as a whole may not reach a corporate average fuel economy (CAFE) of 54.5 mpg in 2025, a result of a resurgent consumer preference for trucks and SUVs and lower long-term fuel price projections that have changed since 2012.
Of note is that the corporate fuel economy average (CAFE) standard and NHTSA projected figures for 2025 MY fuel-economy targets have been revealed as a projection rather than a legal requirement. The EPA standards for GHG emissions stand, until and unless the EPA makes a change in the April 2018 final determination statement. Overall, the report is supportive of the progress and direction of the existing standards. The agencies believe automakers can meet the challenge, and that consumers want it.
The 54.5 mpg figure is the mpg that the agencies find, mathematically and based on many assumptions, the industry as a whole would return if it met the EPA GHG standard using fuel economy only. In 2012, the regulators forecast for the US market to see a split of 67 percent cars and 33 percent trucks in the 2025 model year. According to IHS Automotive registration data, in the year to date May 2012, the split was 50.5 percent trucks and 49.5% cars. Through May 2016, the figures have shifted to 60 percent trucks and 40 percent cars. Consumer behavior, heavily influenced in the U.S by fuel prices, is so far diverging from the original regulator expectation.
Individual automakers targets are based on footprint and sales volume, a system designed to allow consumers the option to buy whatever size vehicle they like. This means the resulting industry-wide number mpg and GHG figures are dependent on consumer purchases and may change without relaxing the standards automakers are required to meet.
IHS Automotive will not adjust its expectations regarding 2025MY targets until after April 2018, when the final determination is made and rules are known. Currently, the 2025 fuel-economy standard is 54.5MPG across passenger cars and light trucks, with each automaker assigned a unique target based on vehicle footprint and sales volume.
The current prognosis of the IHS Vehicle Performance and Compliance Monitor is for the 2025 model year US automotive fleet average to reach 44.1 MPG for passenger car and 31.9 MPG for light trucks, suggesting the industry may need to improve by about 10MPG across both fleets to see 2025 compliance. IHS also believes that the 'advanced' gasoline engine is not enough to close that gap, unless the credit landscape is significantly adjusted as part of the mid-term evaluation (MTE). Even so, there are OEMs that will need to factor in a considerably greater electrification to future portfolios to both comply and compete.
There remain significantly high fuel economy and emissions targets in place. There is also time for ongoing negotiations between all stakeholders to set standards that are challenging, but achievable. Despite the positive tone of the draft report, IHS retains its long-standing prognosis. Given IHS 2025MY projections, the U.S industry will find it challenging to meet the currently defined 2025 targets without a significant increase in both electrification and mass reduction.
Stephanie Brinley is Senior Analyst, IHS Automotive
Posted July 20, 2016