New CAFE standards wouldn't push SUVs off the road

For those who wonder if a new energy bill with tough mileage standards will mean that Americans have to squeeze their families into small cars the answer is: probably not.

While it won't be easy for automakers to achieve a fleet average of 35 miles per gallon by 2020 – a mandate the US House is expected to approve this week – they will keep making bigger cars, possibly even sport-utility vehicles, with more efficient engines, experts say.

"You're going to see light-duty trucks with more advanced diesel and hybrid engines giving a 30 percent improvement in fuel economy without huge changes in the basic package," says David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. "These big vehicles aren't going away."

The reason is market-driven. While sales of SUVs have suffered in the past two years as gasoline prices have surged, light trucks overall (which includes SUVs) still outsold cars in North America last month. Large cars and light trucks are more profitable than small cars for automakers. That's why automakers fought so hard for provisions in the new energy bill that would allow them to keep those big vehicles rolling off the assembly line.

The new House legislation, similar to a measure in the Senate, would boost Corporate Average Fuel Economy standards for cars for the first time since 1985. The current CAFE standard for cars is 27.5 miles per gallon; it's 22.2 m.p.g. for light trucks. The proposed 35 m.p.g. measure is the result of a compromise announced last Friday by House Speaker Nancy Pelosi and Rep. John Dingell (D) of Michigan, who fought doggedly to soften the blow for automakers.

The deal he helped engineer continues allowing cars and light trucks to be categorized separately – rather than being merged together – for purposes of fleet fuel averaging. Had the two been merged, it might have forced automakers to do much more to produce downsized vehicles with less towing capacity, Mr. Cole and others say.

Another victory for Detroit automakers: They still get mileage credits for making "flex-fuel vehicles" that can burn ethanol-based fuel mixes without damage to engine systems. These credits help them meet the overall standard. That feature pleases energy-security hawks, too, who want a large share of US vehicles burning domestic biofuels rather than gasoline from imported oil.

"Automakers are pleased that congressional negotiators ultimately accepted the need for practical provisions like separate car and light-truck standards and incentives for building more autos that run on nonpetroleum-based fuels," said Dave McCurdy, president and CEO of the Alliance of Automobile Manufacturers in a statement.

But many environmentalists are also applauding the compromise, saying it is good news for car buyers as well as the environment.

"Most consumers won't notice much of a difference in their cars, other than that they can actually afford to drive them," says David Friedman, research director of the vehicles program at the Union of Concerned Scientists, a Boston-based environmental group. "No, you won't have a Hummer that gets 35 m.p.g., but one that gets maybe 28 or 29 m.p.g. is possible."

On average, he estimates most vehicle models will get about 10 more miles to the gallon and cost $1,000 to $1,500 more. Even so, he says the slightly higher car payment will pay for itself in lower fuel costs in two to three years.

Not everyone is happy about the deal, which could produce winners and losers in the automotive industry, Cole and other analysts say. Winners will be globally integrated automakers with a lot of high-tech advances already developed, which they can deploy quickly. Losers could be companies with most sales in the US and less technology to pull out of the vault.

Ironically, some automakers with already efficient vehicle fleets may feel more pressure to improve than those that don't. That's because the new standards will put most of the onus for mileage gains on cars and small vehicles that already get high mileage, says a high-ranking official at one automaker who asked not to be named because he did not have permission to speak publicly.

"Any standard that comes out of this process is almost assuredly going to be ... based on the size of the vehicle," he says. "So sport utilities will get less-stringent standards that will be easier to meet, and smaller vehicles will get more stringent standards."

Some sport-utility owners are more skeptical of the new standards.

"They're saying this will save a lot at the pump – but people aren't being told that all these technological improvements will have a pretty significant price tag," says Barry McCahill, president of the SUV Owners of America, a national advocacy group in Washington. "If we get smaller vehicles with less towing capacity, well, for a lot of people that's going to be a deal-breaker."

Experts agree the new standards will mean many more hybrids – and maybe new "plug-in hybrid" vehicles that can get the equivalent of 100 miles or more per gallon using electric drive and powerful new batteries.

"Who knows?" Mr. Friedman says, "If General Motors actually comes through with the Chevy Volt – [a plug-in hybrid slated for 2010 production] – maybe we will all look back on this 35 mile-per-gallon business and laugh."