Corporate average fuel economy

With the energy crisis of the '70s came a push to mandate better fuel efficiency.

With that mandate came the Corporate Average Fuel Economy standards, which allowed the National Highway Traffic Safety Administration to set fuel efficiency mile-per-gallon standards on passenger cars.

In doing so, there needed to be a definition as to what was a passenger car and what was not.

So came this definition for a light truck: 6,000 pounds or less, designed to transport property or people, or generally designed to work off-road.

and the fuel economy standards were unachievable.

The problem with that is when CAFE was done, it's a very old thing in the United States, decades and decades and decades old.

So when the corporate average fuel economy is calculated, they're not using what you see on the window sticker.

They're using the pre 2008 numbers and measurement.

Your RAV4 is everything, your Honda CRV hybrids, everything is way above that fuel economy standard.

And interestingly, even full-size trucks, there are some that are not far behind.

Base Silverado, V6 Ram truck, et cetera, they're relatively in compliance with the CAFE standards because they're going to be somewhere around 27, 28, 29 miles per gallon, according to CAFE.

And the truck fuel economy average is way less than that 34.9. At any rate, other changes are more interesting.

We think these mile per gallon changes is pure political theater.

And the idea that Trump 2 lowering CAFE standards, Biden raising it, Trump 1 lowering it, Obama 1 or 2 raising the standards, this has made no difference at all to U.S. gasoline demand.

So it has been a bad call.

to think that either the raising or the lowering of CAFE standards is having any impact on the underlying trend for U.S. gasoline demand.

The big issue has been vehicle weight.

If you actually cared about it, whether you're a Republican or Democrat, you would have vehicle rate restrictions.

And it is because, overwhelmingly in our view, due to vehicle weights continuing to increase.

So this is political theater.

[laughs]

Let's talk about CAFE standards.

Uh, Biden administration fuel economy standards are being put aside or slashed by the Trump administration.

Now, I'm a little confused because I kept hearing, and maybe I just misunderstood, that the CAFE standards had been eliminated altogether, and, uh, and I don't know if you'd heard that narrative, but I, I certainly thought that was the case, and it seems strange to me.

Yes, I agree with you, and the, uh, article which I have referenced most recently, um, didn't, did not say as such.

Yeah.

He rolled back the, the...

There are these things called CAFE standards for car manufacturers, and it stands for Corporate Average Fuel Economy.

And basically, the manufacturers have to set, take all of the cars they sell world, nationwide, and they combine them and say, "Okay, this is the average fuel economy of all of those cars we sold.

It has to meet this government level of regulation." Well, the regulation that Joe Biden put in there was 50 miles to the gallon, which means you gotta sell a lot of electric cars because they get zero miles to the, or get infinity miles to the gallon.

Well, there's no rocket science you need there, right? But there was a fuel economy change announced this week.

Did you know that? The federal government finally has come up with a new corporate average fuel economy standard.

You hear it referred to as CAFE.

I always thought that was we're going for lunch, but I found out it wasn't.

Whether or not you actually achieve it, that's a whole other conversation.

You know, when somebody says 34.9 miles per gallon, don't think you're going to walk out tomorrow morning and look at the Suburban in your driveway.

and say to it, hey, great, the government says I'm getting 35 miles per gallon because that's not how it works, right? You've got to understand what CAFE is, Corporate Average Fuel Economy.

CAFE is a calculation across the manufacturer's fleet.

The market share of pickups has actually remained relatively flat at about twenty percent or less since about 1980.

The problem lies in the way the Corporate Average Fuel Economy, or CAFE, rules were written.

There were separate thresholds for light trucks and passenger vehicles.

In order to minimize the impact of the rules on their vehicles, automakers started putting more emphasis on utility vehicles that were classed as light trucks and marketed those vehicles very successfully.

The new rule does nothing to temper an abrupt back-and-forth change in MPG standards with every new presidential administration going back to President George W. Bush.

The Corporate Average Fuel Economy program under the Transportation Department has been in place for nearly five decades, but it was only during Bush's second term that the EPA was told to begin regulating greenhouse gases in transportation sources, which also affect MPG standards under the Clean Air Act following a U.S. Supreme Court decision.

The new rule appears destined to be tested in court as well, with environmentalists latching onto the fact that the statute requiring the National Highway Traffic Safety Administration, which is part of the Transportation Department, to set its standards requires it to do so at maximum feasible levels.

Millions of more fuel-efficient vehicles already on the road prove that this new set of standards doesn't hit that target, they say.

marie Hi there, Ryan.

We're talking about CAFE standards, the Corporate Average Fuel Economy standards.

They set a fleet-wide target of about 35 miles per gallon by 2031.

That's a sharp drop from the Biden administration's goal of more than 52 miles per gallon by the same year.