New CAFE proposal would add $5,000 to sticker price, dealer group says

An Obama administration proposal to nearly double today's fuel economy standards could end up tacking on $5,000 to the sticker price of a new vehicle, a top official with the National Automobile Dealers Association said Tuesday.

The proposal, which seeks to raise the corporate average fuel economy to 54.5 mpg by the 2025 model year, would force automakers to adopt costly fuel-saving technologies that could eventually price some buyers out of the new-car market, said Don Chalmers, chairman of NADA's government relations committee. NADA, a dealer trade association, represents 16,000 new-vehicle dealers who operate 32,500 franchises.

A study NADA will release next month will show that the costs associated with the proposed higher fuel-economy standards will exceed the government's projections by more than 60 percent, meaning consumers will pay on average $5,000 more for a 2025 model, said Chalmers, speaking at a public hearing on the proposed standards.

The hearing was one of three scheduled for this month, giving the public a chance to comment on the proposed rules before they're finalized this summer. The other two hearings are on Jan. 19 in Philadelphia and Jan. 24 in San Francisco. The public also may submit written comments until Feb. 13.

The proposal has received the backing of 13 major automakers, the UAW and several environmental groups, including the National Wildlife Federation and the Sierra Club.

German automakers Volkswagen AG and Daimler AG have opposed the proposal because it offers no new incentive for diesel cars.

U.S. regulators estimate the new 2017-25 model year standards will cost about $2,000 more per vehicle upfront, but buyers will save from lower gasoline costs in the long run.

Chalmers said the government's figure is too low and doesn't account for the realities of showroom pricing. A $5,000 increase, as projected by NADA, could add another $60 to $70 a month to a car payment, and in turn, hurt a buyer's ability to get financing, he added.

"I want to sell more fuel-efficient cars," Chalmers said. "If the customer can't get financing, it makes no difference."

Many others at the hearing voiced support for the proposed rules, saying the proposal would help save car buyers money, decrease emissions and reduce the nation's dependence on foreign oil. General Motors, Ford Motor Co. and Chrysler spoke in support of the proposal.

UAW President Bob King said claims that the proposed rules would make cars expensive and hurt industry sales "inaccurate."

"They should look at all the facts," he added.

Citing numbers released last year by the EPA, King said the proposal could save consumers about $4,000 over the life of a vehicle, including the higher upfront cost of the car or truck.

Larry Schweiger, president of the National Wildlife Federation, didn't expect much opposition to the proposed rules.

Said Schweiger: "Whatever pushback we get is going to be very weak, and frankly, vulnerable to criticism."

Mitch Bainwol, president of the Alliance of Automobile Manufacturers, said consumer buying habits will test whether the industry can realistically meet these proposed standards. The Alliance, an industry trade group, represents 12 auto manufacturers, including the Detroit 3.

While many of the group's members have backed the proposal, he stressed the need for a "rigorous" midterm review that will assess whether the rules fit fuel cost trends, technological advances in the industry and consumer buying decisions.

"Looking into the future, consumer purchasing patterns will be the biggest unknown," Bainwol said.

By Christina Rogers- Automotive News