US: OEMs profits won't be hit by new CAFE rules - report
A report from the bank Citigroup released this week has found that corporate average fuel economy (CAFE) provisions being set by the US Senate for 2020 are achievable and that vehicle manufacturers can still make profits at this level.
A bill recently passed by the Senate is targeting an average fuel economy of 35mpg by 2020. Vehicle manufacturers have been lobbying against the change in the legislation, which is the first change to CAFE rules in 30 years, and represents a 10mpg improvement over previous legislation.
The chairman of the Senate Select Committee on Energy Independence and Global Warming, Edward Markey, reacted forcefully to the report. He said, "When you have the world's number one bank, which has financial ties to many major automakers, saying fuel economy standards are a good economic play, it drives a stake through the heart of the auto industry's scare tactics."
The report, "CAFE and the US Auto Industry; A Growing Auto Investor Issue, 2012-2020", was created in partnership with Ceres and the Investor Network on Climate Risk, along with industry experts at the Planning Edge, University of Michigan Transportation Research Institute, and NRDC.
GM is expected to be the major winner from the legislation, while Chrysler is forecast to be the loser. The report estimates that the market for fuel savings technology needs to grow by around US$4.3bn by 2012 to meet the new standards, and by more beyond that. Key beneficiaries of this growth include BorgWarner, Johnson Controls and Tenneco.
According to a press release from the House Select Committee on Energy Independence and Global Warming, the Senate bill, which contains the 35 mpg fuel economy standard and other oil saving provisions, would save more than twice as much oil as the US currently imports from the Middle East by 2030.