Fears Grow Over Meeting 2020 Auto Standards |
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Anthony Fontanelle
January 29, 2008
Automakers are facing a thorny requirement of meeting the 2020 standards which call for the manufacture of vehicles with an average fuel economy of 35 miles per gallon. But automakers fear consumers are not willing to pay more for the technology they are required to meet by 2020.
"Gas prices would have to be $13 a gallon in today's world for consumers to demand a fleet where half the vehicles achieved better than 35 miles per gallon," said Paul Traub, an economist at Chrysler LLC.
Traub said that while smaller models have and will become more popular, manufacturers cannot depend on consumers to choose the most fuel-efficient options. "Americans still want to go to Wally World on the weekends, and we don't want to leave our grandmas and dogs at home," he addressed the Society of Automotive Analysts.
While it is apparent that customers are shifting to fuel-efficient cars, the trend is not enough to make all vehicles compliant with the 2020 mileage standard which was mandated by the Congress in 2007. Customer choices are limited to models such as Toyota Motor Corp.’s Prius and General Motors’ Chevy Aveo.
Based on an Autodata report, sales of subcompact models increased 20 percent last year to 351,161 units, but Americans still purchased more than six times as many huge pickups.
Automakers could be forced to meet standards customers do not demand and will not pay a premium for, reported the Detroit News. That means automakers are required to build vehicles that can still carry seven passengers and haul a boat, but meet more stringent fuel economy standards.
As a direct consequence, aficionados will see modified BMW parts and other auto technology which entail more expense on their part. Chrysler estimates such technology would cost $6,000 to $7,000 per vehicle, Traub said. The said view is attested by Bob Lutz, the vice chairman at General Motors Corp.
“In a highly competitive market, car companies are unlikely to be able to pass that cost on to the consumer,” said Erich Merkle, vice president of forecasting at IRN Inc., who tracks vehicle sales trends. "If the consumer isn't demanding those massive leaps forward, but automakers are forced to produce it, the automakers will have to absorb those costs.”
Absorbing the cost of fuel-saving technologies cuts into profits, which is particularly difficult for Detroit's Big Three, which are already facing higher labor and health care expenses than their foreign competition, Merkle added.
But not everyone thinks more fuel efficient vehicles will have an average of $6,000 sticker price. The premium will be closer to a $1,500 average, according to the Union of Concerned Scientists.
Some automakers have opposing view. "Consumers are going to change, we have already seen that in recent years," said George Pipas, a sales analyst at Ford Motor Co.
Source: Amazines.com