Quick Hit Steven Ross Johnson Wednesday August 1st, 2012, 2:57pm

U.S. Auto Fuel Efficiency Hits Record High With New Standards On The Horizon

Fuel efficiency for new cars sold in the U.S. reached a record high for the first half of 2012, according to the findings of an analysis released last week.

The study was conducted by the automotive analytical firm, Baum and Associates on behalf of the environmental advocacy group, Natural Resources Defense Council.  Two main factors the research identified as being a catalyst behind the trend included an increased production of highly fuel efficient vehicles as well as a rise in consumer demand for such cars.

“Not only are consumers happy about this, but also the automakers themselves,” said Alan Baum, principal of Baum and Associates. “When you look at the new product offerings that are coming, the automakers are clearly aware of the interest of the consumer in fuel economy.”

According to the analysis, new vehicles for the first six months of the year had an average fuel efficiency rate of 23.8 miles per gallon, which was up by 1.1 mpg compared to the same period last year.

Baum said technological advances to the fuel economies of virtually every size and type of new vehicle rolling out onto the market was reflected in consumer buying patterns, as mid-sized cars gained 1.2 percentage points of market share during the first half of 2012 compared to small cars and crossovers, which gained 0.4 percentage points. Overall, automakers saw stronger than expected sales in spite of the still stagnant economy, with projections indicating the number of vehicles sold could reach 14 million by the end of the year, a 1.2 million increase over 2011 figures.

“Instead of vehicle sales declining, which is often the case when fuel prices go up, they actually increased, and more importantly, they increased across a variety of vehicle segments,” Baum said.  “Consumers were able to find vehicles that met their requirements for utility, for size, horsepower and fuel economy, and they didn’t have to go to smaller cars or smaller crossovers to meet those requirements.”

In addition to increased production and sales, Baum also credited the rise in vehicle fuel efficiency to a concerted effort on the part of the automotive industry to adhere to federal regulations set forth by the Obama administration in 2010, which require automakers to reach an average fuel economy rating of 35.5 mpg for their fleets by 2016.

Last November, the U.S. Environmental Protection Agency along with the National Highway Traffic Safety Administration proposed new standards set to begin in 2017 that would see the average fuel economy rating for a fleet increase to 54.5 mpg by 2025. The White House is expected to grant final approval of the rules sometime after mid-August.

But as Alliance of Automobile Manufacturers Vice President Gloria Bergquist pointed out, even after the standards are finalized, they could be subject to change based on the findings of a government review of the initiative that is expected to be held in 2018.

“Right now consumers are in the driver’s seat, and our compliance is based on what consumers buy,” Bergquist said, whose organization represents 12 automakers including Chrysler Group LLC, Ford Motor Company and General Motors. “That’s why it’s important that they [the government] review their assumptions in 2018 because they’re going to look at consumer buying preferences and see how many of these high mileage vehicles are selling and what that means for achieving future standards.”

Critics of the new proposed standards have argued such regulations would cause vehicle sticker prices to go up, with estimates ranging from $500 to as much as $3,000. Supporters have contended however any additional upfront expense would be offset over time by savings found through reduced fuel costs.

According to the U.S. Department of Energy, a motorist driving 15,000 miles annually in a car that averaged 30 mpg would save after five years an estimated $4,365 compared to a vehicle that averaged only 20 mpg.

“As we move forward to the 54.5 mpg standards, we can also be assured that it is good for the American economy because we’ll be investing in our own auto industry rather than sending our energy dollars overseas,” said NRDC Senior Vehicles Analyst Luke Tonachel. “We’ll be investing in the Midwest instead of the Middle East.”

Environmental groups such as NRDC have come out in support of the proposed new standard, citing it would serve as a positive step toward reducing the amount of greenhouse gases released into the air by cars, which the Department of Energy has estimated to be about 1.7 billion tons annually.

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