Lutz says new CAFE standards will increase car price by $6k
Ten months ago, Bob Lutz said GM cars would be $5,000 more expensive if the Bush administration got its way with fuel standards by raising fuel economy 4% every year through 2017. Bush didn't get his way, but Congress did with its newly-signed-into-law energy bill that requires automakers have a fleet average of 35 MPG by 2020. According to Lutz, that's going to be even more expensive: "This is going to be a net average cost of $6,000 per vehicle, which will have to be passed onto the consumer."
Lutz said that the premium would actually range from $4,000 to $10,000, and that "it won't come all at once, because 35 mpg doesn't kick in all at once." No one said that saving the world was going to be cheap -- but $6,000 per vehicle? We look forward to figuring out which vehicles will bear the brunt of the plan. Add $10,000 to the price of a ZR-1 and no one's really going to notice. Add $6,000 to the price of a CTS and, depending on how much more expensive its competition gets, things could get interesting. Add $4,000 to the price of an Aveo and you've probably sent a fair number of buyers elsewhere.
[Source: Detroit News]
Reader Comments (Page 1 of 1)
GoodCheer 5:53PM (1/13/2008)
Why should there be a price premium on cars that already meet the 35mpg requirement? (Don't forget that CAFE uses the 1975 driving cycle mpg in which 35mpg would be rated at about 26mpg today).
Why should those of us who choose to drive low consumption cars pay more to subsidize the fines and development costs associated with someone else's big truck? I hope he only meant new models.
Are the automakers working to get this CAFE increase overturned (I would expect such a more)?
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Turbofrog 5:59PM (1/13/2008)
It's a load of bollocks. That premium is only if buyers want to have their cake and eat it, too. With a mild reduction in performance (drop 50 hp in most mid-size sedans, and you're back to power levels from five years ago - tragic), many cars will be able to make 35 mpg.
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Mike Z 6:09PM (1/13/2008)
It seems that if you had to amortize the R&D costs over a few years, then yes $4k sounds about right.
After all, to get a 40% boost in FE will basically either require a Full hybrid drive system (~$5k right now). A mix of HCCI (Cost unknown) and Mild Hybrid ($1800), or Clean Diesel. And quite possibly a more generous use of aluminum and lighter weight plastics.
The problem is that if this is done fleet wide, you have to recover the cost of engineering these technologies into a large number of platforms.
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Mike Z 6:22PM (1/13/2008)
Of course if we assume that the real world current CAFE mpg is 18.5 and the new standard would raise it to 26, the payback with $3 gas is 6.7 years for a $4,000 increase in price. (If in 10 years its $5/gal the payback is in 4 years)
I'd figure the NPV, but I'm too lazy.
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mike 6:42PM (1/13/2008)
Before I can believe Mr. Lutz I want to see what price PSA/Peugeot sell the 307 Hybrid. Anyway 70 mpg seems to have an excellent payback potential.
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Mike Z 6:51PM (1/13/2008)
I think that Lutz was clear though that he was talking apples-to-apples for the price--Same size, same acceleration, handling, etc. You might see them meet in the middle in reality.
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Wildgoosechase 7:01PM (1/13/2008)
Smaller cars will have to improve as well as larger cars to keep the average up, otherwise and Aveo will be the largest family car availible. To mitigate the cost increase virtually all low to moderately priced vehicles will be imported. Detroit will never be the same....
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Dad 7:51PM (1/13/2008)
"Ten months ago, Bob Lutz said GM cars would be $5,000 more expensive if the Bush administration got its way with fuel standards by raising fuel economy 4% every year through 2017. Bush didn't get his way"
Bush wanted 4% a year? Why didn't the press mention this? I know why, because it makes Bush look good. Sorry for asking. Anything that makes Bush look good is off limits.
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Dave 9:46PM (1/13/2008)
Seems plausible to me.
The Prius meets the CAFE requirement and costs about $21k while, for example, a Pontiac G6 (4cyl, auto, A/C) costs about $15,000.
Those are transaction prices I've seen in the paper, not MSRP.
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Dave 9:58PM (1/13/2008)
As always, people who are willing to sacrifice performance will have cheaper options.
I foresee some very aerodynamic 4cyl midsize cars with tall geared manual transmissions (or DSG autos) meeting the 35 mpg without expensive technology. Direct injection and variable valve timing will be more than sufficient.
GM will not be able to charge more for such low tech cars to subsidize their large cars/trucks because there will always be automakers that do not sell many large cars/trucks that will not require small car buyers to subsidize large car/truck buyers. The market will rule as always.
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dhofmann 10:37PM (1/13/2008)
Lowering speed limits to the point where air resistance just begins to have an effect on fuel economy would do wonders for CAFE, and for no cost at all.
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Dan 3:03AM (1/14/2008)
There's one other choice, although I doubt GM would go for it: miss the CAFE target and just pay the fines. I don't have the formula for calculating fines, but here's a real world example. BMW paid $28M in fines in 2001 and sold about 150,000 cars that year, including a small number of Minis. That averages to a fine of less than $200 per car.
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Whopper 12:21PM (1/14/2008)
"Lowering speed limits to the point where air resistance just begins to have an effect on fuel economy would do wonders for CAFE, and for no cost at all."
True, if your time is worth nothing. Highways have speed limts, not requirements. Get in the right lane and slow down if that's what you want.
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Travis 3:28PM (1/14/2008)
Well, there's always foreign car companies that are ready to get in on the fuel efficiency standards. Whether its hybrids, BEV's or Flex fuel cars.
While the car companies this out, I'm just going to finish converting my sport bike. If it comes to it, I'll convert a small car. 5-10K for the conversion, and the cost of the rolling chassis.
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Rick 4:33PM (1/15/2008)
#8, Sorry, nothing about Bush's 8 years makes him look good, other than the back of his head as leaves office.
Reasons why his plan was voted down (quoted)-
1. Failed to account for the value of reducing heat-trapping carbon dioxide emissions in setting the standards,
2. Failed to close the SUV loophole,
3. Failed to set fuel economy standards for all vehicles in the 8,500 to 10,000 pound gross vehicle weight class (for example, the Ford Excursion, the Hummer H2, and the F-250 pickup), and
4. Failed to carry out an adequate environmental assessment under the National Environmental Policy Act (NEPA).
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