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62 mpg standard coming for cars?

By Claes Bell, CFA ·
Friday, May 13, 2011
Posted: 4 pm ET

It looks like a new federal fuel economy standard for cars may be coming down the pike. Dave Guilford of the Automotive News has the story:

Quiet negotiations going on in Washington could change profoundly the nature of U.S. cars and trucks over the next 13 years, making more of them electrified and more costly.

New federal fuel economy and emissions rules took effect Jan. 1, requiring automakers to hit 35.5-mpg corporate average fuel economy by the 2016 model year.

But automakers and regulators from the EPA, the National Highway Traffic Safety Administration and the California Air Resources Board already are haggling over a tougher proposal initiated by President Barack Obama last October. That plan calls for a CAFE range of 47 mpg to 62 mpg by the 2025 model year.

The idea of buying a car that gets 62 mpg sounds pretty appealing, what with the average price of gas now officially topping $4 a gallon in much of the country. But all that high-mileage technology won't come without a significant pricetag at the dealer. From the article:

One industry ally says hitting 62 mpg would require widespread vehicle electrification, adding nearly $10,000 to the price of a new vehicle. Federal agencies say the cost would be lower -- $3,500 per vehicle, at most -- and would be offset by consumer fuel-pump savings.

That $10,000 price tag sounds pretty steep, but it looks to be pretty close, at least when you consider today's prices for ultra-high mileage cars. The Chevy Volt, which is rated by the EPA at 60 mpg combined, costs $40,280 before a $7,500 federal tax credit kicks it down to $32,780.

On the other hand, a top of the line four-cylinder Honda Accord, with many of the same technology goodies, retails at around $27,355, about 13 grand less than the Volt. Figure more Volts being manufactured eventually brings down the price of Volt's plug-in technology a little, and that $10,000 figure looks pretty close to a good ballpark guess.

What do you think? Would you pay $10,000 more for a car that got 62 mpg?


Jon G
May 17, 2011 at 6:27 am

It all depends on one's daily driving situation. I commute ~110 miles per day round trip and at that level of travel the extra $10k investment would take ~6years for a 62mpg car to pay for itself over my current '98 Chevy Prism that averages ~32mpg.
If the real difference, due to the incentives of the tax credit is assumed to be $5k rather than $10k the payoff now becomes ~2.5years. And absolutely YES! I would make that trade off!

Of course, the real issue is that I bought the Prism for $3500 three years ago, so the real difference between the vehicles is much much more than simply the difference in the fuel costs.

Tim Russell
May 16, 2011 at 2:36 pm

Kill the partisanship, the 2016 CAFE standard was passed by the Bush administration. Still CAFE is the wrong way to do things. In Europe they have good, efficent vehicles because consumers demand them, why, they tax the fuel. They pay 8-9/gallon so they want a 70 MPG vehicle. Here they did CAFE with different standards for cars and trucks. The automakers simply sell enough cheap fuel efficent cars to offset the rest of their fleet. To move enough they even sold at a loss. With that little loop hole taken care of they had very little encouragement to improve the economy of the rest of their fleet. As long as fuel stayed cheap most consumers wanted power and features so that's where the research dollars went for autos for North American market. When fuel prices go high and stay high that will change. CAFE just forces the automakers to build more stuff that the consumer doesn't want. Electic cars ain't gonna do it either, the mainstream consumer isn't paying new car prices to get a vehicle that has to be recharged every 80 miles or so. That's what they're getting out of the Nissan Leaf. Volt makes more sense but is even more spendy.

stanley perry
May 14, 2011 at 5:13 pm

Yes the technology already exist or is in waiting. The 62 or better will not only ease our dependence on foriegn oil, but it will also promote a healthier environment, lowering healthcare costs.And whether we like it or not global warming is real.This also would help immensely in eliminating co2 emissions. It would promote a healthier planet.

May 14, 2011 at 9:54 am

Government involvement is good for us...Anyone with half a brain just needs to consider what a fine job our government is doing to help the middle class now, my personal life has improved quite a bit lately, I used to have a house, car payment etc but since the repo man came I no longer have to worry about those payments I lost my job but thanks to free programs I want for nothing I now am receiving free college courses to improve my job skills, food stamps, free housing and free transportation when needed.. if everyone would just give government a chance they will come through for you, as far as gas prices who cares when you can't afford a car anyway and don't need to go to work, again I want to thank the present administration for all the help they have provided me and my children because without government being involved I would probably be working for minimum wage which would not support my lifestyle

May 14, 2011 at 9:03 am

"What do you think? Would you pay $10,000 more for a car that got 62 mpg?"

Two words: NO WAY!

Robby Robertson
May 14, 2011 at 6:31 am

The $6500 difference reflects the expected decrease in the price of batteries for electric cars. Not at all unreasonable based on the ever-decreasing price for the hybrid batteries for the Prius (now less than $2K). First there is the issue of the price of gas- do you really like the yo-yo? It will continue to do so and probably get much higher as long as speculators can buy commodities on thin margins. We can't produce enough oil at less than $4 gasoline prices no matter how hard we try. Second, there is the issue of Americans sending money out of the country to drive uselessly big vehicles around. Yes, we love Canada and sometimes Mexico, but most of our other suppliers are either brutal dictatorships or enemies of the Western way of life.

Walter Stewart
May 13, 2011 at 7:12 pm

This is another example of Gov't creating a problem then mandating a solution that causes yet another problem.

Cheap efficient cars were around even 20 years ago. Remember the Ford Festiva? The 1200CC Honda Civic?

Both cars got well into the 40's even up to 50 MPG. Both were VERY affordable - $3495 in '79 for the Civic, $4995 for the Festiva in 93!!!

Of course they were stripped down micro cars.

Since then, the NHSA side impact standards and other regulations have made it impossible to build and sell these cars (similar to the Tata...). Reality: if you are in a compact car and are hit but a SUV, you're in a world of trouble. Regardless of the standards.

The real purpose of these regs (and the new ones as well) is to price mobility out of the middle classes grasp and force people into public transportation. Individual mobility is freedom - freedom to change your residence if you don't like the taxes, schools, etc. Freedom to change jobs. Freedom to travel. Freedom to organize and socialize....

This is the Obama Administration's social engineering masterpiece.

Justin Ashdown
May 13, 2011 at 4:37 pm

Why is it not possible? Small cars using Direct injection Turbo Diesel get 70 miles per gallon in Europe, yes our gallon is a little bigger, but not so much.
This country is more than capable of stepping up and making the technological advances, the problem is politics and greed.