New CAFE Fuel Economy Regulations Save You Money and Provide for a Greener Future

Just days ago, the Obama administration announced new fuel economy standards that will go into affect over the next 6 years. The standards specify fuel consumption for both cars and lights trucks and will help pave our way towards more environmentally friendly vehicles. There has been a significantly high amount of reports stating that the new CAFE regulations will lead to more costs for automakers and consumers, but few reports suggesting that the CAFE standards will have a positive overall impact for years to come. Let's look at some of the numbers to better understand the impact that the new fuel economy regulations will have on the automotive industry as a whole.

The CAFE standards will slowly trickle in beginning in 2012. By 2016, the fuel economy numbers for passenger cars will be required to be 35 miles per gallon. This number is significantly higher than standards in use today where passenger cars only have to meet mileage requirement in the upper 20s. Furthermore, light trucks will also be required to meet a high mile per gallon number of nearly 28 miles per gallon.

For automakers to meet these numbers, re-engineering of vehicles must begin almost immediately. Automakers will have to focus on producing efficient engines. Automakers will also have to focus on building aerodynamic vehicles and will have to utilize several lightweight components to meet the high fuel mileage requirements. This will add costs. According to numerous reports, automakers will shell out over $50 billion to meet the new CAFE requirements. However, the automakers will pass the cost right on to consumers by increasing the average new vehicle price by an estimated $985.

So maybe CAFE requirements are costly, at least initially. However, when the numbers are reviewed in detail, the added upfront costs are more than outweighed by the return on investment. For example, if a vehicle costs $985 more to purchase, but obtains 7 miles per gallon better than older vehicles, over the life of the vehicle you will shell out $3,000 less in fuel, resulting in a net gain of over $2,000. So does it really cost more to make and purchase more fuel efficient vehicles? The numbers suggest that actual costs are less as vehicles become more fuel efficient.

Yes new CAFE regulations will increase the initial cost of vehicles, but that cost is offset from money saved on fuel. If you add in the cost of saving the environment, new CAFE regulations begin too look even more attractive. Everything comes with a price, but in the case of increased fuel economy standards, that price is overshadowed by the benefits we will see in the future.

Source: Detroit News