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What will changes to US emissions regulations mean for consumers?

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President Trump recently renewed his call to the Environmental Protection Agency (EPA) to review the emission standards enacted during the Obama administration. These standards mandate that the average fuel economy of all vehicles sold must be 54.5 miles per gallon by 2025.

In exchange for an expected decrease in the required average fuel economy, the new administration will likely put additional pressure on auto manufacturers to increase the number of vehicles built in the United States and to decrease investment in foreign operations.

This means that the proposed changes would have two major results for consumers:

 

Decreased overall fuel economy for gas vehicles

Assuming that gas prices remain relatively low and consumer demand for less efficient vehicles like trucks and SUVs continues to be strong, we project an overall decrease in fuel efficiency compared to the trajectory towards the 2025 emissions standards.

There will, of course, remain a number of consumers who prefer to drive more fuel economical vehicles either because they wish to save money at the pump, or because they're looking to reduce their carbon footprint. We project that there will continue to be a market for fuel efficient gas-powered vehicles, plug-in hybrids, electric vehicles and other zero-emission vehicles. This is especially true in California where gas prices tend to be higher than the rest of the country and many consumers are conscious of their impact on the environment. 

 

Increase in the number of American made cars

In an increasingly global economy, it can be difficult to know which cars are actually American made. Many American brands have factories in the US, Canada, Mexico and elsewhere, while Asian and European brands have plants throughout the US. We expect, the current administration to offer incentives to manufacturers that build a significant number of their US-bound vehicles in this country. This could lead to an increase in the number of vehicles that are assembled in the United States regardless of where the brand is headquartered.

 

There is one final legislative wrinkle, which will likely mean that many manufacturers will continue to manufacture and promote the sale of electric and other zero-emissions vehicles.

 

The California effect

California has taken this one step further. California’s Zero Emission Vehicle (ZEV) mandate requires that between 2018 and 2025 automakers must ramp up their production of ZEVs, like plug-in hybrids and fuel-cell vehicles, to account for 15.4 % of vehicles sold. California estimates that by 2025 when these rules are fully implemented, new vehicles will emit 34% fewer global warming gasses and 75% fewer smog-forming emissions.

 

Source

 

This legislation has been adopted by thirteen other states and accounts for 40% of US auto sales. As the chart above illustrates, the percentage of ZEV cars that must be sold by each manufacturer rises annually until it hits the 15.4% target.

This puts tremendous pressure on manufacturers to produce commercially viable plug-in hybrids and electric vehicles (in addition to more traditional vehicles) over the next several years despite the changes to the federal standards. Because the standards target two very different things, automakers can make their standard line-up to follow the revised EPA guidelines, while producing ZEV cars that can meet the California standards.

 

Of course, consumer demand is the biggest question mark in our predictions. If consumers demand fuel-efficient vehicles, auto manufacturers will build cars that meet those demands.

 

As always, your Cartelligent agent can help discuss your options so that you can make an informed decision about your personal needs. Whether you're looking for a new luxury plug-in hybrid or any other new car, Cartelligent can help you get a great deal on exactly what you want. Call our team of car-buying experts at 888-427-4270 or get started today.