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Higher MPG Standard Likely to Bring $4.8bn in Profits for Automakers, Study Says

The global auto industry will likely earn an extra $4.76 billion, or 5.3 percent, in profits in 2020 due to proposed U.S. gas mileage and emissions standards to be finalized in coming months, according to research led by Ceres and Citi Investment Research and Analysis.

American automakers will likely see the biggest percentage increase in profits under the standards – an extra $2.44 billion in 2020, or about 6.3 percent more than baseline projections, according to the research, Fuel Economy Focus: Perspectives on 2020 Industry Implications, developed with Baum and Associates, Meszler Engineering Services and Oakland University’s School of Business Administration.

The report finds that meeting the proposed standards will likely boost vehicle sales for the automotive industry as a whole by about four percent, or about 600,000 vehicles. As a group Ford, Chrysler, and GM would likely see a 300,000-vehicle improvement over baseline sales, Ceres said.

According to the study, sales would increase because increased fuel economy brings down overall operating costs, leaving consumers money to buy more vehicles or more expensive vehicles.

The report said that the internal combustion engine is expected to remain the primary powertrain for years to come, despite advances in alternative fuel vehicles. The new standards could be met by using existing technologies that improve the performance of traditional gas-fueled cars.

Differences in emissions standards between the U.S. and other nations, particularly those in Western Europe, have slowed the deployment of diesel engines in the U.S. However, the move towards some harmonization may reduce the cost of emissions reduction and increase the use of these powertrains in the U.S., the report said.

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