Motor Trend magazine reports that meeting President Obama’s fuel-economy standards for 2025 will cost consumers $6,714 more per car. This is based on a paper published by the Center for Automotive Research last June, when Obama’s standards were still in flux.
There is some debate over this conclusion: a group called the International Council on Clean Transportation thinks that CAR has exaggerated the difficulties (CAR’s response). ICCT notes that the auto industry has a history of crying wolf when the federal government proposes new safety or pollution standards: Henry Ford II, for example, predicted that seatbelt and safety glass standards would “close down” his company.
The CAR report is based on the cost of using existing technology to meet Obama’s standards. While the Antiplanner doesn’t believe that “if you mandate it, the technology will come,” it is just as foolish to assume that there will be no technological improvements between now and 2025.
The base price of a 1964 Mustang was $2,368, which, using the consumer price index, translates to about $17,000 in 2011. The base price for a 2012 Mustang is about $22,300, or almost a third more. Is all of that difference due to new pollution, safety, and fuel-economy standards, or is some of it due to other improvements or improvements that would have been made anyway?
The original Mustang came with an anemic, 101-horsepower engine with a three-speed transmission that got very poor gas mileage. The 2012 base model has a 305-horsepower engine, six-speed transmission that gets more than 30 miles per gallon. Improvements such as these are probably worth a little extra, and buyers who would rather have a car with a 101-horsepower engine have their choice of several cars that cost a lot less than the Mustang. The 110-horsepower Hyundai Accent GL, for example, costs about $10,705, which is about $1,520 in 1964 dollars.
So while the Antiplanner is not enthused about government mandates, I am not panicked about them either. The new fuel economy standards are pretty strict, but if gas prices stay high I suspect they are not a lot stricter than the market would produce anyway.