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Automotive Suppliers to Feds: Keep Emissions, Fuel Efficiency Standards

Calstart surveyMajor automotive suppliers say national fuel economy and emissions standards are important for long-term business plans and investments — and don’t want to see the feds weaken the vehicle rules, according to an industry survey commissioned by clean transit technology nonprofit Calstart.

The survey comes as federal agencies undertake a mid-term review of the Obama administration’s emissions and fuel efficiency standards for passenger cars and light trucks — standards that aim to double these vehicles’ fuel economy to 54.5 miles per gallon and cut GHG emissions in half by 2025.

During this review, the EPA and the National Highway Traffic and Safety Administration will listen to feedback from the auto industry and the public and then decide whether to revise — or keep — the targets for model year 2022 to 2025 vehicles. The decision-making process, which must be completed by 2018, will incorporate such issues as cost and whether the technologies to meet the standards are safe and market ready.

While automakers have not specifically called on the agencies to weaken the standards, they have warned that these targets will be too costly to the industry and consumers.

According to the new survey, however, automotive suppliers have a different opinion about the so-called CAFE, or corporate average fuel economy, standards.

“There is a strong, shared view among a majority of suppliers that the federal standards are feasible and will encourage more innovation and investment in the US,” said John Boesel, president and CEO of Calstart, in an interview.

Calstart says the survey, which polled and interviewed 23 Tier 1 suppliers that sell parts directly to automakers, is a first-of-its kind. The suppliers include Honeywell, BorgWarner, Eaton and Johnson Controls. The others replied anonymously. The nonprofit commissioned Ricardo Energy & Environment to conduct the survey over the summer.

It found:

  • 70 percent of suppliers said policymakers should not adjust the program’s goals.
  • 65 percent agreed with the decision to set new miles-per-gallon standards for 2025, with 30 percent saying they strongly agreed with the decision.
  • Among those who agreed, all but one named regulatory certainty as critical for the industry and half said the standards spark innovation.
  • 59 percent said that fuel-economy standards help spur job growth.
  • Suppliers identified a wide range of conventional and electric technology that could be used to meet the standards.
  • Three quarters agreed that setting targets beyond 2025 is also important for long-term planning.

Mihai Dorobantu, the director of technology planning and government affairs at Eaton Vehicle Group, which participated in the survey, said the fuel economy standards are helpful for Eaton and for the industry as a whole.

“We are investing anyhow in technologies that save fuel because it’s important to our OEMs and it’s important to our business strategy,” Dorobantu said in an interview. “The regulatory framework gives us certainty in these investments. Otherwise these investments are really tied to the value of saved fuel, and that goes up and down depending on the price of oil. The standards create certainty as to what the targets are so we don’t have to switch our investments based on oil being $35 a barrel or $80 a barrel.”

Low oil prices — which mean cheaper gasoline at the pump — make larger, less fuel-efficient vehicles like trucks and SUVs more affordable to consumers. This is a problem for automakers because the CAFE standards are based on the average fuel economy of their entire fleet. More trucks and SUVs mean a lower average fuel economy.

The Calstart survey, which asked suppliers about the effect of oil prices on fuel efficiency technologies, garnered a mixed response. About 45 percent said that low oil prices do not have a noticeable effect on these sales; 45 percent also said that low prices reduce the demand for, and sales of, fuel efficiency technologies.

Despite current and future fluctuations in oil prices, federal standards can provide stability to the industry, Boesel says.

“There is some concern that low oil prices will result in less interest on the part of consumers to buy more efficient vehicles,” Boesel said. “But nobody knows what is going to happen with oil prices. The industry wants certainty so they can better plan and make long-term investments. By staying the course [with the CAFE standards] we are encouraging more efficiency and innovation and ultimately that’s going to be really beneficial.”

Automakers can implement a range of technologies to meet the deferral standards. These include turbocharging, engine downsizing, more sophisticated transmissions, vehicle weight reduction, aerodynamics, and idle stop-start, along with improved accessories and air conditioning systems.

This flexibility, and allowing automakers multiple paths to achieve compliance, is what makes it cost-effective for suppliers to bring new efficiency technologies to the marketplace and for carmakers to keep their costs down as well, Dorobantu said.

Earlier this summer, the EPA, National Highway Traffic and Safety Administration and California Air Resources Board issued a technical analysis of the CAFE and greenhouse gas standards for light-duty cars and trucks for model years 2022 to 2025. The agencies will take public comments on the analysis until Sept. 26.

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