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MAKE BIG AUTO BUCKS WITHOUT SELLING CARS

GOVERNMENT SCHEMES can give rise to curious marketing anomalies. For instance, it’s possible within the auto industry to make big bucks without selling cars.

This reminds me of an adage when I was teaching college mathematics: “What a great endeavor if it weren’t for all those students.”

The oddity comes from our federal government’s promotion of enhanced fuel economy, culminating in its 2025 model year requirement of cars and trucks averaging 54.5 mpg.

We’re nowhere near it yet. And, indeed, nuances of the regulation imply a 2025 real-world 39 mpg or so, not 54.5. See http://wp.me/p2ETap-9s for background on this.

The Environmental Protection Agency keeps track of fuel economy. It also issues credits to automakers on the basis of their cars’ mpg (inversely, their CO2 output). The figuring began with the 2009 model year. See http://goo.gl/6Wid8g for a start of the EPA documentation.

EPA$

 

Each EPA credit represents one metric ton of CO2 kept out of the atmosphere, relative to that year’s mpg standard. According to EPA calculations, at the beginning of the 2013 model year Toyota and Honda had received 136.7 million credits, 60 percent of the entire industry’s pool.

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Automakers with the largest credit balances at the 2013 model year start. Source: EPA. See also Automotive News, May 5, 2014.

If an automaker’s vehicles fall below the mpg standard for a particular model year, it can resolve matters in one of four ways: It can apply credits accumulated from previous years.  It can improve its vehicles’ fuel economy. It can pay stiff fines for non-compliance. Or it can buy credits from another automaker, for cash or services negotiated between the two.

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Who bought? Who sold? Source: EPA.

Nissan made significant profit by selling credits to Chrysler and Mercedes-Benz. Mercedes-Benz also bought credits from Tesla, which sold fewer cars during that time than other automakers had in recall programs. And Honda deserved enthusiast’s points for selling credits to Ferrari.

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Companies and surplus/deficit data, based on grams per mile of carbon dioxide. Source: EPA.

It’s amusing that Coda and Fisker are high on the list, based on their 2012 model year data (or is that non-data?). At least Tesla sold some cars too.

I cannot explain Porsche bettering Toyota’s performance, nor Suzuki’s low ranking. These oddities may lurk in EPA figuring of advanced technology, size versus mpg, past or future credits or other regulational subtleties.

Note too, these EPA data are surpluses or deficits in grams per mile of CO2 . That is, EPA credits involve mpg, not the sort of pollutants treated by a car’s catalytic converter. These EPA data are not, as sometimes reported, based on “emissions” in the sense of that traditional trio of unburned hydrocarbons, HC; carbon monoxide, CO; and oxides of nitrogen, NOx.

The regulations invoke credits for advanced technology (certain air conditioning refrigerants, for instance; see http://wp.me/p2ETap-gR). There are applications of past and future crediting. Plus, there’s the trading of credits.

Like those college kids, cars have always been something of a bother. ds

© Dennis Simanaitis, SimanaitisSays.com, 2014

One comment on “MAKE BIG AUTO BUCKS WITHOUT SELLING CARS

  1. Bill Rabel
    June 27, 2014

    Dennis –
    Some anomalies arise from the ride-height of the vehicle, which seems to partially explain the dearth of wagons in the States, having been replaced by crossovers. Porsche’s Cayenne GTS rides one inch lower than the Cayenne, except in the U.S.A., where it rides only a half-inch lower. Porsche explained that if it rode as low as the European version, it would be classified as a car, whereas with a slightly higher ride height it is classified as a truck. There is obviously a lot of gaming of the EPA numbers going on.

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This entry was posted on June 27, 2014 by in Driving it Today and tagged .
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