Obama Mileage Mandate Will Fuel Auto Disaster

Industrial Policy: On the same day the administration releases rules mandating a near-doubling of fuel economy standards, GM announces it is suspending production of its plug-in hybrid Volt amid disappointing sales.

The latest "corporate average fuel economy" (CAFE) standards will require the average fuel economy of all the cars an automaker sells to admost double to 54.5 miles per gallon by 2025.

Automakers largely back the new standard. Lots of fuel-saving technologies exist today, with more in the offing, they say. But the industry also admits the mandate will require significant change in the kind of cars automakers build and sell.

"Electric vehicles will play a huge role in getting there," Wade Newton of the Alliance of Automobile Manufacturers told IBD. That's because traditional gas-powered cars today come nowhere near that 2025 goal. And whether they ever will isn't clear.

Even the tiny Smart car gets just 36 miles a gallon. And no hybrid on the market today meets Obama's mileage goal. Plus the rules will require every car, large and small, to dramatically improve its fuel economy.

The Honda Fit would need to get 61 mpg by 2025, according to the National Highway Traffic Safety Administration. That's double what it gets today. How Honda can possibly close that gap is anyone's guess.

In contrast, the EPA gives electric cars huge "miles per gallon equivalent" ratings. The all-electric Nissan Leaf gets a 99 "mpge" rating, the Volt a 60.

That, along with generous credits for electric cars in the new CAFE rule, means automakers will have little choice but to try to push plug-in cars onto the market. This might please Obama, who wants a million electric cars on the road by 2015. But it's small comfort to consumers, who clearly aren't interested in buying them.

Even today, regular old hybrids make up a paltry 2% of the market. Consumers are even less interested in plug-in cars. Volt sales were 23% below what GM expected last year, and they're falling well short of this year's goal. Leaf sales are down 26%. And that's despite an extraordinarily generous electric-car rebate in the form of a $7,500 tax credit.

On top of this, all the fuel-saving technologies mandated by Obama's CAFE rule will boost car costs by around $3,000, according to the National Automobile Dealers Association, pricing 7 million people out of the market.

Backers say all this can be worked out. But CAFE's history is hardly reassuring. In 1978, President Carter forced a 53% increase in car mileage over the following seven years. The result, as Edmunds.com CEO Jeremy Anwyl explained, was "a generation of what were often truly awful vehicles."

Automakers stuffed cars with not-ready-for-prime-time fuel-saving technology, depowered engines and radically downsized their fleets.

Worse, the standards resulted in tens of thousands of needless highway deaths, for the simple reason that those smaller, lighter cars were inherently less safe. The National Research Council put the CAFE-caused death toll at 2,600 lives in 1993 alone, and USA Today figured it totaled 46,000 people by 1999.

The new CAFE rule does give automakers an out, if they're able to show in 2017 that they just can't hit the mark. That's small comfort to consumers who otherwise will be forced into buying cars they don't want, or find they can't afford one at all.