No Volt, No Pass?

GM needs the Volt for CAFE purposes. Supposedly the Chevy Volt will receive an EPA rating of 230 MPG. This is all based on funny math and creative accounting. But if we take it at face value and apply it toward GM's CAFE (Corporate Average Fuel Economy) average something dramatic happens.

Assuming total GM production of 3 million vehicles and that its existing CAFE average is 27.5 mpg, look at the tables below and see how various Volt production volumes can impact GM's overall average. If GM could produce 100,000 Chevy Volts that are rated at 230 MPG the rest of the 2.9 million vehicles would only need to average 29 MPG to meet CAFE of 35.5 MPG. Between engine downsizing, lighter vehicles, lower drag designs and increasing consumer preference for more efficient vehicles it should be an attainable target.

Contrast that with the second table and you can see that even if GM starts producing an efficient small car that gets 50 MPG and sells in really large numbers that it still wouldn't take the average anywhere near 35.5 MPG required in 2016. In fact the other 2.5 million vehicles GM would produce would need to average nearly 33 MPG.



Despite the fact that the 230 MPG figure would be a total fabrication, I predict this will become a political exercise that promotes CAFE and perhaps a cap-and-trade program as the keys to solving our transportation greenhouse gas problems, which would be a shame because the technology is absolutely vital to the eventual transition to electric vehicles. It should be appreciated for what it is. Let's hope it doesn't fall victim to a political hijacking.

CAFE: Who Are We Kidding? (Part 3)

There are many more issues with this regulation, but I'll leave you with these:

We were particularly encouraged that Reformed CAFE will confer no compliance advantage if vehicle makers choose to downsize some of their fleet as a CAFE compliance strategy...

Another fallacy. The agency says larger, heavier vehicles are safer vehicles (for passengers). They say lighter vehicles are more efficient. So the fuel economy regulation is now based on vehicle footprint. This is even more of an unnecessary attempt at classifying vehicles (see Part 2).

...requiring improvements in fuel economy necessarily has the effect of requiring reductions in tailpipe emissions of CO2 emissions.

This one line of thinking probably has more to do with why CAFE was initiated in the first place and demonstrates that the whole program is based on a flawed assumption.

They missed the global view, focusing on the proportional relationship between CO2 emissions and fuel consumption. Did it not occur to legislators (the agency shouldn't take all the blame - they're doing what they were directed to do) that improving fuel economy encourages people to drive more thus NOT reducing the amount of fuel used, even if fuel economy was improved?

The answer is yes because the rulemaking goes on to further contradict itself.

... the rebound effect from higher fuel economy will increase emissions of these pollutants. Thus, the net effect of stricter CAFE standards on emissions of each pollutant depends on the relative magnitudes of its reduced emissions in fuel refining and distribution, and increase in its emissions from vehicle use.

In other words, CAFE will work if people don't drive much more. But when fuel cost goes down vehicle miles go up. Hmmm....

The 2002 Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards report by the National Academy of Sciences (NAS) report cited in the rulemaking states:

While raising CAFE standards under the existing structure would reduce fuel consumption, doing so under alternative structures 'could accomplish the same end at lower cost, provide more flexibility to manufacturers, or address inequities arising from the present' structure.

Here is a report written at the behest of Congress and acknowledged by NHTSA that CAFE is not the best way to go about improving fuel economy and efficiency. So what does the government collectively do? More of the same.

What they should do is tax the fuel and cancel this complicated and ineffective program. Stop trying to make a pig fly.

CAFE: Who Are We Kidding? (Part 2)

More thoughts about CAFE:

Limits to five the number of model years for which standards can be established in a single rulemaking.

This virtually guarantees the prevention of long term planning. The agency itself admits that its estimates are based on projected production figures by the manufacturers. Yet future regulations are constantly in the air since each rulemaking is limited to a 5 year horizon.

This is akin to looking 5 feet ahead of the car while driving. You will make constant steering inputs without looking further up the road, resulting in actions that matter little in the long run.

Distinguishing between passenger cars and light trucks is unnecessary. Why classify different types of vehicles that are intended for private use? All this has accomplished is to shift consumers from large cars to larger SUVs.

The agency could not set out the exact level of CAFE that each manufacturer would be required to meet for each model year under the passenger car or light truck standards since the levels would depend on information that would not be available until the end of each of the model years, i.e., the final actual production figures for each of those years. The agency could, however, project what the industry-wide level of average fuel economy would be for passenger and light trucks if each manufacturer produced its expected mix of automobiles and just met its obligations under the proposed "optimized" standards for each model year.

Manufacturers' compliance with the regulations depend on actual production levels and targets.

Compliance with this regulation is entirely dependent on whether a manufacturer can accurately meet its production projections (or buy compliance credits from those that do). But they are at the mercy of market demand. How much faith can we put in these projections when the industry has traditionally been cyclical (see 2009 sales)? These projections are hit or miss.

This also throws into question any cost/benefit estimate on the agency's part.

CAFE: Who Are We Kidding? (Part 1)

It's taken a while but here's my summary of the CAFE standards for 2011.

Any rational person with a modicum of understanding of this industry, after reading several sections of this rulemaking will come to the conclusion that the U.S. government is wholly incapable of effectively regulating fuel efficiency.

The rule is complicated, unnecessary and ineffective. Instead of the government playing automotive engineer, it should establish a fuel price floor which would enable the market to address these issues faster, better and cheaper.

The end goals are to reduce oil consumption, for both national security and environmental reasons, and to improve highway safety. It's not the government's place to dictate technically specific solutions.

As I've said many times before, people (the market) will respond to higher fuel prices. Just look at what happened in 2008 when fuel prices rose dramatically. People drove less (and slower), and roads were safer for it as well.

I'm not saying tax fuel so the price is at peak 2008 levels, but implement a long-term plan to steadily increase the minimum fuel price. It's an understandably difficult political proposition. Don't call it a tax. Position it as an innovation incentive and then use the proceeds for that purpose.

People will choose more appropriate vehicles for their needs. More efficient vehicles are driven more, public transport is needed. Consumers are then directly involved with reducing fuel use. The market knows best.

The CAFE standard is based upon a number of significantly false and unknown assumptions. For instance:

1. All vehicles are driven the same amount. This is implied because the regulation only looks at fuel economy (mpg) instead of fuel consumption (gallons).

2. Manufacturers can accurately predict market demand and what the sales mix of models will be.

3. Consumers will save money. Unlikely when you consider fuel economy hasn't really improved (though cars do have a lot more power now) but the manufacturers have had to spend BILLIONS (by NHTSA's own estimate) on CAFE compliance.

4. The regulation is enforceable. Technically this is correct, but it heavily depends on assumption #2.

5. Provides stability. No can do with a 5 year planning horizon (see Part 2).

6. Mergers and alliances will not affect CAFE levels. This may be the most complicated aspect of it all (and rife with loopholes).

Full NHTSA document: [Text, PDF]

Raise the Fuel Tax Already!

Raising the fuel tax gradually and consistently would be so much more effective at curbing consumption and enhancing technical/economic stability than all these political "solutions" such as the CAFE standard. The CAFE standard doesn't even have to be rescinded, just not increased further.

The solution is really simple (though no politician is likely to have the courage or support to propose it). Take the national average gasoline price for the year to date. Make that the minimum gasoline price everywhere in the country.

Then add a modest (e.g. $0.05/gallon tax). Then every quarter going forward add another 0.5% to 1% to the tax, adjusted for inflation.

The price is never permitted to fall below the minimum (unless you want to see a run on gasoline). The same could be done for diesel. Use the tax revenue to fund roads, bridges, and ways to further reduce oil dependency.

This way the cost of gasoline will eventually outpace inflation but in a gradual way that companies and consumers can actually plan for, rather than the crapshoot of price speculation and wild swings.

Here are couple of food-for-thought articles:

China Raises Fuel Prices, Fuel Standards Are Killing GM

NHTSA Roof Crush & Foot Print Workshop

June 25th - Attended a workshop organized by the National Highway Traffic Safety Administration (NHTSA), part of the US Department of Transportation. Two topics were covered: Revised FMVSS Roof Crush standard 216a and calculating vehicle "footprint" for fuel economy purposes.

This is basically wheelbase x track width. The presentation was about the specifics of how they determine each vehicles "footprint".

Then it was off to the compliance lab. No pictures were allowed, but the lab's web site has some. Look under standard 216 of this page:

http://www.general-testing.com/vehiclesafetystandards.htm

A new Honda Fit was tested (and destroyed) at yesterday's event. Held up pretty well. The standard now requires vehicles under 10,000 lbs GVWR to be able to withstand 3 times their unladen weight while allowing for no more than 127 mm (5 inches) of platen (the rectangular plate used to crush the roof) travel and a maximum force of 222 Newtons (50 lbs) of head contact on the head form (like a test dummy).

One Nationwide Fuel Economy Standard

Finally, something rational is being attempted. All along industry has been telling the regulators there needs to be one nationwide standard for emissions and fuel economy. Having multiple standards would be shortsighted and just plain senseless.

The states cannot go off and set their own standards because that will result in a far greater compliance and administrative burden with no clear benefits. Air doesn't stay within state or national borders.

Automotive News and the NY Times (among others) reports that tomorrow the EPA will announce that there will be a single national standard in place for the years 2012-2016. Granted it comes with tough fuel economy standards (basically California's standards - kind of a trojan horse-esque move) but at least everyone will know the rules and be able to get on with the job of actually building cars. Expect a fleet average of 35 mpg in 2016.

The CAFE program is fundamentally flawed (I promise I'll eventually get around to that topic) but this development at least provides some concrete targets for the next several years.

States Shouldn’t Regulate Vehicle Emissions

The new Obama administration has decided to direct the EPA to review whether states such as California should be permitted to enact tougher fuel economy standards on auto manufacturers to reduce Greenhouse Gas (GHG) emissions. While reducing GHG emissions and oil consumption is a great goal, letting states do so is not the way to go about it.

If anything, EPA should handle it. There should be Federal preemption on all emissions regulations for mobile sources. Unless cars never cross state lines, letting states regulate them is a huge potential regulatory burden and an impediment to interstate commerce without any clear benefits.

In the long term increasing the CAFE figure (regulated by NHTSA) is good. Requiring a fleet average of 35 mpg by 2020 is not that high of a hurdle. It’s going to get a lot of needlessly excessive vehicles off the road. But that doesn’t come without a price. The cost of the technology will increase vehicle prices, manufacturers will have to redirect and commit extra R&D funds, and there will be a steep learning curve where new cars may not live up to expectations. Regulation tends to disrupt “business as usual” and leads to (sometimes ungainly) innovation. But it happens over time. Trying to compress it into too short a time is going to result in a lot more unintended outcomes and drive up the cost.

Also, the unrealistic concept of changing the regulations for 2011 is akin to rulemaking after the fact. The specifications for new models to be launched then are already frozen. Some will be launched in 2010. And that doesn’t include vehicles that are already in production that will still be in production then. It’s less than two years away. No matter what the rules say, it isn’t going to happen. I suspect this part of it is posturing for negotiations about the 2015 time-frame and beyond.

My recommendation would be to only allow the Federal government to regulate mobile emissions and accelerate the CAFE requirements starting around 2015 by etching the requirements in stone for the period of 2015-2025 by the end of 2009 so that manufacturers have the assurance of regulatory stability and can commit to investing toward those goals.

NHTSA Fuel Economy Proposal

The new CAFE (Corporate Average Fuel Economy) proposal is going to have unintended consequences. It’s based on the premise that each manufacturer’s fleet should have an average based on the size of each model and the number of vehicles produced.

The size of each model is based on its “footprint”, that is the track width multiplied by the wheelbase, and that the smaller this area is the higher the fuel economy (MPG) of the vehicle must be. It is intended that this would raise the average fleet fuel economy.

I also believe this is NHTSA’s solution to their dilemma of how to categorize a vehicle as a passenger car or a light truck, a dilemma that has become markedly more of an issue with so many different models now available from manufacturers.

However, this proposed regulation potentially won’t achieve its objective because manufacturers will build larger, less efficient models than they could since they have lower fuel economy hurdles to clear, relative to smaller vehicles. It’s a disincentive for manufacturers to offer smaller (and presumably more efficient) vehicles.

If that is the case then the way to have a more efficient vehicle fleet is to leave it to the market to demand more efficient vehicles by voting with its money. So why have the burden of this additional change?

Every manufacturer should be accountable to one standard, and not have their thresholds based on their product mix. Foundations should be built on level ground. NHTSA should clarify the definitions of automobiles and light trucks, and apply these definitions to all vehicle manufacturers the same way.

Here’s a link to the proposal (scroll down to National Highway Traffic Safety Administration):

http://www.access.gpo.gov/su_docs/fedreg/a080428c.html