SAFE CAFE Chaos

Motoring Weekly has written a number of articles about the CAFE regulations:
CAFE – Corporate Average Fuel Economy from September 2017
CAFE Rules Adjusted from October 2017
Update on CAFE Standards from May 2018

Now the current Administration is set to cause chaos with this set of rules. The idea of the standards was to ensure that cars got progressively more fuel efficient over a period of several decades and then to have them tightened with enough lead time to allow the manufacturers to comply. To appease the US based oil companies, the Administration has announced that they plan to ease the plan thus allowing more fuel to be consumed and therefore more will need to be bought by the consumer. The new rules will be called SAFE: Safer Affordable Fuel Efficient standards.

It is expected that lawsuits will be lodged against the Government to stop them from implementing their changes. Some of the suits will come from environmental groups who are keen to see carbon fuels abandoned, some will come from individual States and some will come from the manufacturers themselves. Although this sounds odd, in reality it isn’t, manufacturers have long term strategies for their fleets which means that having structured and reliable government policy is critical, however if the laws change regularly, the manufacturers will struggle to conform. Changing a large company is like turning a supertanker, it can take a while to correct the course.

It is expected that the courts will try and block the SAFE standards until they can figure out whether they completely replace the original CAFE standards and manufacturers will need to decide which way to go – they have a number of strategies in play with regards to full electric, hybrid or petrol powered vehicles. Diesel is dying, certainly for the European manufacturers however this fuel source wasn’t as popular in other parts of the world such as the US. In some respects, the manufacturers should really go with the most stringent rules – probably from California, who lead the world in automotive fuel economy and emissions regulations. The issue then, is whether some of their vehicles will be illegal in other States and territories and what the impact of their revenue stream is going to be.

The arguments that are expected in court will be based around the timing of the revised standards and the fact that no technical analysis to substantiate the changes appear to have been made. However most US citizens would know that the Government is run by random tweets these days, so it will be interesting to see how the court cases go. Hidden inside SAFE is a more worrying item – the Administration is desperate to trim California’s powers in this area and so there is legislation to cancel or dramatically change that State’s Clean Air Act.

These SAFE rules are expected to be released in late March and call for an annual increase in efficiency by 0.5 to 1%. The CAFE rules were designed around a flat 5% adjustment per year. The rules are expected to affect post 2021 vehicles. So far only Ford and Honda have supported keeping the CAFE rules and Toyota have suggested a compromise half way! 

I suspect that the lawyers will make a stack of cash from this change and the oil companies won’t be getting the extra revenue they are hoping for. American buyers have been getting used to cheaper fuel prices in recent years and the fact that if they buy a vehicle with good economy then they don’t need to spend as much at the pump or as often. Importantly, the Administration in its “America First” mode has forgotten that the world has other continents with ever stricter economy and emission rules, so the European and Japanese manufacturers will continue to build for those stricter policies.

American buyers will be swayed to look at foreign vehicles, many will do the maths and figure that it will still be cheaper to buy and run an import (with a possible tariff) over the longer term. The Big 3 will then face another homegrown crisis, however hopefully by then the world will see a new more intelligent President who thinks more about the citizens than his wallet or ego. At that point, lobbying will have reached a peak and sense will (hopefully) prevail.