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The Future of Automobile Fuel Efficiency in America

Posted May 31, 2018

What does the future hold for automobile fuel efficiency? A good starting point for such an analysis is to look at the government push for fuel economy regulations and targets a few years ago. These regulations forced industry innovations that meant many consumers and businesses saw some fuel economy breakthroughs because of these efforts.

Beginning in the 2011 and 2012 timeframe, the Obama policies began setting new and tougher fuel efficiency targets while negotiating with Chrysler and General Motors in the midst of their bankruptcies. As a result, many American vehicles have realized benefits from innovations brought on by tougher government regulations.

Is the Push for Fuel Efficiency Wavering?

In the post-bankruptcy world, however, the recovered industry is seeing increased sales at record levels bringing the tougher regulations into question. The auto manufacturing industry maintains that the regulations have become increasingly expensive and unrealistic. The mood regarding such regulations has changed as well in a Trump administration that is known for being skeptical of regulations that hurt businesses.

One case the auto industry presents is in the decrease in sales of hybrid and electric vehicles. Lower sales in these types of vehicles make it difficult to realize regulatory targets. Environmentalists, however, counter this argument by claiming improvements in gasoline and diesel engines technologies should make up for the lack of hybrid and all-electric vehicle sales. Further, they maintain that the targets drive innovation in the industry.

Noting that fuel efficiency innovations are predicted to move forward, what does that mean to a typical American auto owner driving a light-duty vehicle? Light-duty vehicles are generally defined as passenger cars and light trucks.

The two main factors to be considered for fuel efficiency are the number of miles traveled and the fuel efficiency of the vehicle. According to the U.S Energy Information Administration (EIA) Annual Energy Outlook Report 2017, a record was set for vehicle-miles traveled by light-duty vehicles in the United States in 2016 at 2.84 trillion miles. Since then, average distance traveled has remained constant at around 12,000 miles per year however, there is a higher count of vehicles on the road making the total number go higher.

The total miles driven by light-duty vehicles per year is expected to rise and are projected to be around 3.33 trillion in 2040. While total mileage is expected to go up, the fuel efficiency of light-duty vehicles is expected to go up as well.

Fuel Efficiency Regulations

Given the compensating effect of increased fuel efficiency over increased miles, EIA’s The Annual Energy Outlook 2017 (AEO2017) Reference Case predicts a decline in light-duty vehicle energy use between 2018 and 2040. This decrease is due to increases in fuel economy regulations and resulting fuel economy innovations for new cars year after year. Although new vehicles are a small part of the overall population of light-duty vehicles at first, they add up over time and have long-term implications for overall fuel consumption. EIA’s AEO 2017 projections reflect changes in the vehicle sales mix as well as the fuel economy standards that are applied to light-duty vehicles. Despite a trend of more vehicles being classified as light trucks, the AEO2017 Reference Case predicts improvements in fuel economy for new light-duty vehicles and the total population of older light-duty vehicles through 2025 and beyond.

It is important to consider how fuel economy standards are set for light-duty vehicles by the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA). The standards applied to passenger cars are more stringent than they are for light trucks. For 2015, the standards for fuel economy averaged about 35 mpg for passenger vehicles and about 27 mpg for light trucks after considering the differences in the vehicles physical attributes. The standards for both increase over time so that 2025 vehicles must reach about 53 mpg for passenger cars and 38 mpg for light trucks.

It is also noteworthy that stricter fuel economy standards for model years up to 2025 have already been set forth. Fuel economy for passenger vehicles is predicted to increase over 43% by 2025. That translates to 31 miles per gallon (mpg) in 2015 rising to 45 mpg in 2025. New light trucks have similar statistics with fuel economy that is predicted to increase 46% from 21 mpg to an impressive 31 mpg.

In short, fuel efficiency is a driving factor in vehicle sales, and paired with the government-mandated targets, we will see fuel efficiency improve significantly over the next eight years.

Written by Mark Daniels

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