What Would a 56.2 MPG CAFE Standard Mean for Plug-ins?
On Monday the Obama administration announced its intent to set 56.2 mpg as the starting point for a final decision on Corporate Average Fuel Economy standards leading into the 2025 model year. The number is slightly lower than the 62 mpg that advocates like the Natural Resources Defense Council had been calling for, but still mandates an ambitious 5 percent per year increase in average fuel economy from carmakers wishing to do business in the United States.
So will a strong standard result in more plug-ins being produced and sold in the American market?
“In theory, [carmakers] won’t need a substantial amount of plug-ins to meet the standard,” says Roland Hwang, Transportation Program Director at NRDC. “In practice, I think the program will act as a powerful incentive to commercialize plug-ins, because automakers will be looking for all kinds of ways to comply with a strong standard.” According to federal government analysis, the standard could be satisfied with model lineup that breaks down to include 46 percent hybrids and 3 percent plug-in hybrid and electric vehicles.
Witness Hyundai, which has already pledged to hit at least 50 mpg by 2025 regardless of the final CAFE number, but in the near term is focussed on maximizing the efficiency of gas cars and expanding its share of the hybrid market. The flip side of that coin is Nissan, which is working toward a goal of having EVs make up at least 10 percent of its global sales by 2020.
Different OEMs will have to follow different strategies for reaching 56.2 mpg. Electric vehicles receive substantial fuel economy credits and are currently counted as having zero upstream emissions, making them an attractive target for balancing out lower efficiency gas cars and light duty trucks.
More hybrids on the road should also help to bring down the cost of plug-ins, says Hwang. “Stronger standards will drive high adoption of hybrids which will bring down the cost of many similar components, motors, batteries, power electronics, etc. As these technologies become cheaper, it will help plug-ins become more affordable.” This will be particularly true for companies like Nissan and Hyundai, which are planning to use lithium ion battery packs in both plug-in vehicles and conventional hybrids.
So while the dramatically higher proposed CAFE standards for 2025 won't necessarily force carmakers to make electric vehicles the central component of their strategies for hitting 56.2, it should serve to make plug-ins a much more attractive proposition for OEMs and consumers alike.
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