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WITHOUT A lot of fanfare last month, the U.S. Environmental Protection Agency published an update of automakers and their emissions credits amassed since 2009. Toyota and Honda are sitting pretty. GM has a lot, but its trend is the wrong direction. Ford and Chrysler dipped into the red for Model Year 2011. And Tesla has itself a (moderate) cash cow. See http://goo.gl/HeZ4j.
The units in this table are metric tons of CO2, as estimated over the lifetime of vehicles. For carbonaceous fuels, there’s a direct relationship between CO2 and mpg.
Federal Corporate Average Fuel Economy standards are ramping up to 54.5 mpg in Model Year 2025. But everyone already recognizes this figure will result in a real world of no more than 40 mpg.
Are automakers cheating?
No. Check out “54.5 Mpg and the Misinformed,” www.wp.me/p2ETap-9s. Briefly, valuations of CAFE testing are different from those appearing on Monroney stickers. Also, automakers are given credit—think “enhanced phantom mpg”—for electrification, flex-fuel capability (even though many think E85 is a bad idea; see www.wp.me/p2ETap-ET) and advanced technology such as upgraded air conditioning (see www.wp.me/p2ETap-gR).
In any event, CAFE has been “Them that has, gets.” Even back in the two decades (1990-2010) of its 27.5 mpg, Toyota and Honda typically did better than the standard, thus accumulating a cushion in a complex scheme of carry-back and carry-forward. Now, in fact, matters are even more complex, with credit transfers and credit trading too.
Not that any automaker can afford to sit on its duff er… credits. The latest CAFE standards are footprint-specific: A tidy little Honda Fit has a footprint of 39.5 sq. ft., i.e., 98.4-in. wheelbase x 57.7-in. (average) track. Based on this, the Fit must return at least 37 mpg in 2013 CAFE testing, equivalent to a Monroney sticker figure of 28 mpg. A Chevrolet Impala’s 110.5-in. wheelbase and 62.0-in. track give it a footprint of 47.6 sq. ft. and a target of 32 mpg CAFE/24 mpg Monroney.
Light trucks, by the way, get a different set of targets from those applied to passenger cars. This is despite the fact that, these days, many light trucks are used purely in passenger car roles. For example, a Ford F-150’s footprint is 65-75 sq. ft., depending on model, and its mpg target today is 22 CAFE/17 Monroney.
In any case, there’s an excellent argument that footprints bring everyone’s feet to the fire, more or less equitably.
Of course, any automaker will use credits to its advantage. One strategy is to balance near-term investment with long term. Should the new—more expensive—air conditioning refrigerant be introduced across the entire product line now or brought in gradually? What about developing that electric car for 2019 or waiting a few years for battery costs to drop?
Another interesting strategy is to continue amassing credits—and trading them to less proficient competitors for cash. Tesla says 10 percent of its revenue has come from selling $40 million of its California state credits.
If ever there was a need for automaker game-theorists, it’s now and in the coming days. ds
© Dennis Simanaitis, SimanaitisSays.com, 2013