New Auto Efficiency Regs: Special Interests Win, Consumers Lose.....How many Jobs will be lost in the Sector?

New Auto Efficiency Regs: Special Interests Win, Consumers Lose.....How many Jobs will be lost in the Sector?(Heritage).The federal government finalized new automobile efficiency rules today for cars and light trucks for model years 2017–2025. The rules require an average fuel economy of 54.5 miles per gallon (mpg) in 2025. Proponents of the rule advertise the more stringent mpg standard as a win for producers, consumers, and environmentalists. The fact is that top-down fuel efficiency standards are unnecessary and have numerous unintended consequences. The Administration is saying that the new standards will save consumers money, reduce emissions, reduce oil consumption, and create jobs.
But will consumers actually save money? It depends on whom you talk to. The government acknowledges that increased fuel efficiency standards will increase the upfront cost of a vehicle but that these higher prices will be offset by savings on gasoline.
Generally, these cost savings assume that the buyer keeps the vehicle for its entire lifespan, which usually doesn’t happen. Further, consumers tend to drive new, fuel-efficient vehicles more, which reduces the estimated price, oil, and emissions savings. These advertised savings also assume that the government’s increased price tag estimate for new vehicles is accurate. Automotive systems engineers argue that it’s not—the real price is much higher. Robert Bienenfeld, senior manager for environment and energy strategy at American Honda Motor Company, emphasized, “There is concern that if there is too much cost associated with it, we’re going to be hurting demand. It’s a challenge. You can get too far ahead. You can make too big of a leap and go for a higher fuel economy that maybe the market won’t bear.” Higher prices reduce demand and force people to hold onto their older vehicles longer. Reduced demand means fewer cars produced, which means automakers have to shed jobs. 

STUDY: 56 MPG Standard by MY2025 to Cost 220,000 jobs - 62 mpg could put almost 300,000 out of work. FENTON, MI (July 7, 2011)—A white paper from the Michigan-based Defour Group finds that a significant number of auto sector jobs would be lost if the federal government’s proposed fuel economy mandates for Model Year (MY) 2017-2025 vehicles were implemented. Federal regulators, currently meeting with automakers behind closed doors, are considering increasing the standards to as high as 56 mpg to 62 mpg over that time period. Dean Drake, the paper’s author, confirmed a U.S. Energy Information Administration estimate that automakers would sell 2.4 million (approximately 14 percent) fewer new vehicles if standards are set to hit 62 mpg by 2025.
“Clearly, sales losses of this magnitude could be expected to lead to job losses in the industry,” Drake said. Drake bases the study’s job loss numbers on the National Highway Transportation Safety Administration (NHTSA) analysis of the 2012-2016 MY CAFE standard that said that one job would be lost by the OEMs and their suppliers for every 11.3 new vehicle sales which fail to sell.
The study also calculates dealerships job losses as a result of fewer new car and truck purchases. “These projected job losses will NOT be offset by the development of new technologies creating so called ‘green jobs’ as many contend,” Drake added. “The advanced technology vehicles such as electrics will only make up a small part of the new vehicle fleet. Plus there is no guarantee that these new jobs would stay in the United States.”
Even though President Obama stressed that he had “no intention” of running General Motors when he bailed out the company, these new fuel standards effectively foist a management decision on all automakers.Read the full story here.