Proposed U.S. government mandates to improve fuel economy have the potential to wipe out one-quarter of the jobs in the U.S. auto industry by 2025, an auto industry think tank says.
If the government goes ahead with proposals to force auto makers to double fuel economy to 60.1 miles per gallon (96.7 kilometres) over the next 15 years and gas prices stay at about $3.50 (U.S.) a gallon, vehicle prices will soar, consumers will stop buying new cars and trucks and vehicle production will plummet, eliminating 220,000 jobs at auto makers and parts suppliers.
That grim scenario was offered Wednesday by the Center for Automotive Research, a respected industry think tank based in Ann Arbor, Mich.
"Hardly a green job outcome," Sean McAlinden, the organization's executive vice-president of research and chief economist, told a small gathering of auto industry executives Wednesday.
The CAR study comes as the U.S. government debates new fuel economy proposals beyond those already established for 2016 and underlines the immense difficulty both Washington and the auto industry will have in changing driver behaviour in a country that enjoys gasoline prices substantially lower than those in almost every other developed nation.
The CAR analysis shows that simply requiring auto makers to offer more fuel-efficient vehicles as a way of reducing greenhouse gas emissions could increase vehicle emissions instead of reducing them, Mr. McAlinden said.
"We're likely to see considerably older automobiles on the road by 2025," Mr. McAlinden said. "We call that the Cuban auto syndrome," he said, flashing a slide of 1950s era U.S. car such as those that still dominate the roads of Cuba and lack the technology that has reduced emissions over the past 50 years.
He and other CAR officials presented a complex set of data to back up their argument that Washington should examine the impact of new regulations.
They took into account the impact of safety and emission technology that will be introduced during the next few years; the effect of electric vehicles, including the cost of charging equipment and electricity; the role fuel savings will play in demand; and the price of gas during the period.
They presented three potential scenarios for miles-per-gallon requirements—41.7 mpg, 49.8 mpg and 60.1 mpg. The Obama administration has publicly mused about raising mpg requirements to more than 60 in the second half of this decade and the 2020s from the level of 35.5 mpg required by 2016
With all the elements CAR studied factored in, including gas prices of $3.50 a gallon, U.S. drivers would be facing sticker prices more than 20 per cent higher than the 2009 average of $28,960.
Consumers would balk, Mr. McAlinden said, adding that the average age of vehicles on the road in the U.S. hit a record 10.2 years last year.
But the imposition of a gas tax by the federal government would have a major impact on consumer decisions, he noted. "Clearly there would be stronger consumer demand for higher fuel economy."
Officials from J.D. Power and Associates, a consulting firm that has a large automotive division, said U.S. drivers increased their purchases of more fuel-efficient vehicles in 2008, when the price of gas soared to more than $4 a gallon.
But the price of gas has since fallen and consumers are shifting back to less fuel-efficient vehicles, said Mike Omotoso, senior manager of global powertrain forecasting at J.D. Power.