Automakers say U.S. fuel economy standards unrealistic, cite costs and consumers

[October 07, 2017]  By David Shepardson

WASHINGTON (Reuters) - Automaker trade groups told U.S. regulators they should revise fuel efficiency mandates approved in the final weeks of the Obama administration because the costs would be onerous and the standards do not reflect how cheap gas prices are affecting consumer demand, but they stopped short of asking for a specific reduction in the requirements for 2025.

The comments to the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) set up the next round in a battle between automakers and the state of California and environmental groups, which argue against any retreat from limits to greenhouse gas emissions.

Automakers want changes that would make it easier for them to comply with fuel economy standards, including flexibility in the use of a system of credits under the program.

Automakers have to meet parallel fuel economy standards overseen by the NHTSA and vehicle emissions limits regulated by the EPA.

President Donald Trump has championed deregulation, saying it is needed to promote economic growth. In March he told auto workers, "We are going to ensure that any regulations we have protect and defend your jobs, your factories."

The Alliance of Automobile Manufacturers, a trade group representing General Motors Co <GM.N>, Toyota Motor Corp <7203.T>, Volkswagen AG <VOWG_p.DE> and others, said the EPA understated the costs of technologies needed to meet the 2025 requirements.

The Obama administration finalized rules in 2012 to double the fleetwide average fuel economy to 54.5 mpg by 2025, but the EPA revised it to 51.4 mpg based on a rising number of trucks. The EPA said that would result in a real world average of 36 mpg by 2025, because of credits automakers receive and differences in test procedures versus real-world driving.

Automakers earn credits by producing cars and trucks that exceed the requirements in a given year -- and can then apply credits to deficits in future years. They also earn credits for air conditioning improvements, building electric vehicles and other improvements that may not be captured in testing procedures.

Automakers said the Obama administration finding that the 2025 targets were achievable at reasonable cost was based on errors in modeling the impact of new technology and assumptions about fuel prices and sales trends that have proved wrong.

Cars drive past a California emissions testing site in Oceanside, California, U.S. on September 29, 2015. REUTERS/Mike Blake/File Photo

Global Automakers, a group representing Honda Motor Co <7267.T>, Hyundai Motor Co <005380.KS> and others, cited shifting consumer preferences for bigger vehicles as a problem.

"There is, simply put, a misalignment between the increasing stringency of the standards and the decreasing consumer demand for fuel efficiency," the group said in comments filed late Thursday with the EPA.

The two auto groups said the EPA has agreed to develop a new modeling approach after they said a prior model "caused the agencies to overestimate the role that conventional technologies can play in achieving future" improvements.

An EPA spokesman declined to comment on its reconsideration, saying it would review all comments.

The risk for automakers is that California, the most populous U.S. state, will withdraw from a 2012 agreement to adhere to the national EPA standard if the current standards are weakened. California's standards are followed by a dozen other states. Automakers have said it is vital to maintain one national regime for emissions regulation to avoid higher costs by having to meet two differing standards.

California on Friday said it would not budge.

“If the federal standards are relaxed despite the overwhelming body of evidence demonstrating they should continue as is, California will maintain its standards. Moreover, we will pursue all available legal remedies to overturn federal actions that are unsupported by the facts and law,” state officials said in a statement.

Environmental groups also oppose the decision to reopen the standards.

The Natural Resources Defense Council said "automakers can meet the current standards with known technologies at reasonable cost. ... Rolling them back, however, would increase pollution, raise costs for drivers, slow innovation and put jobs at risk."

(Reporting by David Shepardson; Editing by Leslie Adler)

[© 2017 Thomson Reuters. All rights reserved.]

Copyright 2017 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.