Proposed Fuel Economy Rules Underestimate Rising Vehicle Cost, NADA Says

At a public hearing on proposed fuel economy rules for model year 2017-2025 passenger cars and light-duty trucks, the National Automobile Dealers Association (NADA) urged federal agencies to consider the rising consumer cost of new vehicles. The hearing took place on January 17.

"To work, fuel economy rules must require improvements that are affordable," said New Mexico Ford Dealer Don Chalmers, and Chairman of NADA's Government Relations Committee, at a joint Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) hearing in Detroit, Michigan. "According to EPA and NHTSA, the cumulative cost of all of their fuel economy rules will raise the average price of a vehicle by $3,200. This is not pro-consumer."

"While EPA and NHTSA can mandate what automakers must build, no one can dictate what customers will buy. If our customers do not purchase these products, we all lose," Chalmers added. "NADA supports fuel economy increases as long as they take consumer demand and vehicle choice into account."

With new auto sales rebounding from a low of 10.4 million in 2009 to 12.7 million last year, Chalmers cautioned that proposed fuel economy standards for the 2017-2025 model year could have real economic consequences if consumer demand is not fully taken into account.

"Dealers embrace the pivotal role we are playing to help lead our nation back to the road of prosperity, but we are wary of anything that might depress auto sales and turn back the gains being made," he said.

In the testimony, Chalmers pointed out that model year 2017-2025 fuel economy rules are not even due until April 1, 2015.

"Rushing to set costly new standards nearly three years early will unnecessarily and unhelpfully forgo the opportunity to learn how consumers react to the aggressive new standards now being put into place," Chalmers said.

Chalmers also questioned the government's estimated $3,200 per vehicle price increase as a result of the proposed regulations. Initial analysis from new research, conducted by NADA, indicates the federal government's estimate of $3,200 may be substantially underestimated and the actual cost to consumers may be as high as $5,000. Chalmers indicated that the study will be released in several weeks.

NADA raised concerns over how the federal government calculated vehicle cost. Chalmers indicated from the initial analysis that the administration's fuel economy proposal underestimates costs and actual retail prices may increase by as much as sixty percent.

In another study to be released in the coming months, NADA will look back at the EPA's 2002-2010 medium- and heavy-duty truck emissions mandates. Their conclusion is that the EPA underestimated the average actual compliance costs by a factor of three and that widely recognized market disruptions occurred as a result of fuel economy rules.

EPA and NHTSA held an additional public hearing in Philadelphia on January 19 and will hold another on January 24 in San Francisco.

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