Critiquing the new CAR study: Crippling flaws in both cost and benefit analyses [press statement]

23 September 2016—Automotive technology expert John German, Senior Fellow/U.S. Co-Lead at The International Council on Clean Transportation, was critical of a new report from the Center for Automotive Research (CAR).

CAR released the report on the economic impacts of the 2025 Corporate Average Fuel Economy standards on Wednesday, September 21, one day before a House Energy and Commerce subcommittee hearing, where German testified.

“You can immediately see a couple big problems,” said German. “The per-vehicle cost scenarios are all too high — way too high: the lowest-cost scenario is much higher than EPA and NHTSA estimates of the per-vehicle costs for fuel efficiency technology, and CAR’s scenarios go up from there. And the study just ignores indirect benefits.”

Autoblog reported that CAR ducked responsibility for the report’s narrow scope saying, “Due to time and resource constraints, the CAR team did not investigate indirect costs.”

CAR ignored EPA and NHTSA per-vehicle cost estimates and only assessed scenarios with higher to much higher cost increases

• CAR used $2,000, $4,000, and $6,000 cost increases for their scenarios.
• EPA’s latest technology cost estimate, in the Technical Assessment Report (TAR) released in July, is $1,670.
• The cost analyses for the 2017-2025 rulemaking estimated the cost of 2025 technology compared to the 2016 baseline at $1,836 – so the technology costs are coming down.
• If only 2022 to 2025 is considered – which is the focus of the mid-term review – EPA estimates the cost increase at $864 per vehicle in the TAR.

German said, “For $6,000, a manufacturer could make every vehicle in their fleet a full hybrid, which would blow the doors off the standards. It’s not a scenario that a serious, credible study should even consider.”

CAR failed to assess the value of other attributes desired by consumers provided by these technologies, such as:

• Turbocharged engines deliver more torque and better acceleration at low engine speeds. More transmission gears improve launch and are quieter on the highway. Weight reduction improves acceleration, ride, handling, braking, and payload and tow capacity.
• Consumers want these benefits, and have demonstrated that they’ll pay for them. Example: The 3.5L V6 EcoBoost engine in the F150 costs $595 more than the standard V8—yet more customers opt to spend the extra money for the V6 than stay with the standard V8, for the additional low engine speed torque and better towing capacity.

German said, “In order to properly assess the impact of technology costs on sales, you have to assess the value of the other attributes to the consumers.”

CAR only considered the impact of fuel savings on new vehicle sales and automotive manufacturing and dealership employment.

• CAR only included the first 3.4 years of fuel savings valued by new car purchasers.
• The average life of a car is well over fifteen years. Fuel savings after 3.4 years continue to put money in consumers’ pockets that they spend on other household goods and services, with positive employment impacts.

Media contact: Christina Heartquist, 415-453-0430