CAFE Rule Will Add $900 to $10,000 to Cost of Car

By Penny Starr | July 7, 2008 | 8:23 PM EDT

( - The new Corporate Average Fuel Economy (CAFE) standards - set by Congress and signed into law by President Bush in the new energy bill - will require vehicles to get 35 miles per gallon by the year 2020 and will add somewhere between $900 and $10,000 to the cost of buying a car, dependent upon which expert is consulted.

That cost, high or low, will boost the average price of a new car, which will be passed onto consumers, according to carmakers and independent analysts.

The Comerica Automotive Affordability Index says that the average cost of a passenger car today is $27, 958. If CAFE standards add $900 to the price of a car, it will raise the average car price to $28,858; but if the CAFE regulations cost closer to $10,000 to implement, the average price could go up to $37,958.

Bob Lutz, vice chairman at General Motors, predicts the highest increase per vehicle -between $4,000 and $10,000 - with the average about $6,000.

The American Council for an Energy-Efficient Economy (ACCEE), a liberal group, claims a council study shows a much lower cost increase - about $900 for smaller vehicles to $1,500 for the largest cars and trucks.

Whatever the real cost is, however, the experts agree the consumer will foot the bill.

"No matter what the cost is - $900 or $9,000 - is the consumer willing to pay that much more or should they be forced to pay that much more because of a government mandate?" Kelsey Zahourek, federal affairs manager with Americans for Tax Reform, told Cybercast News Service.

"ATR is against (the CAFE) standards. We think it's government getting involved where it shouldn't get involved - the private sector," Zahourek added.

In fact, Zahourek said, because the CAFE standards are a federal regulation, the cost to consumers is no different than a new tax.

"If the cost is incurred due to a government regulation, it's just a hidden form of taxation," Zahourek said.

Myron Ebell, director of Energy and Global Warming Policy with the conservative Competitive Enterprise Institute, agreed that consumers will no doubt pay thousands more for their vehicle but also that the new cars will be lower in quality and less safe.

Automakers, he said, will have to find other ways to keep costs low, including compromising on performance and comfort. And smaller cars are more dangerous, Ebell said.

"Like my colleague Sam Kazman likes to say, 'CAFE kills,'" Ebell told Cybercast News Service. Ebell cited a 2001 study by the National Academy of Sciences that examined the earlier CAFE standards imposed in the 1970s.

The study says, in part, "While acknowledging that some existing technologies could reduce the fuel consumption of new cars in the next 10-15 years, the study noted that these would increase the cost of cars and trucks and it would take decades before all the current 200 million cars on the road are replaced.

"It also noted that downsizing of vehicles in the 1970s and 1980s may have contributed to an additional 1,300 to 2,600 fatalities (alone)" - a number that could add up to thousands more deaths on American highways under the new CAFE standards, Ebell said.

The ACCEE said that technological advances will mean the new CAFE standards won't mean smaller cars for all Americans, but Ebell disagreed. He said more people will be driving smaller cars not only because smaller and lighter vehicles get better gas mileage, but also because consumers will "choose" them for affordability reasons.

"Our main concern is that CAFE standards limit consumer choice," Ebell said. "And second, the increase in fatalities."

There could be other victims of the CAFE standards, said Ebell. The American men and women who work for automakers could face job cuts, a possibility that would be devastating in states like Michigan, which has the highest unemployment in the nation at 7.4 percent.

"It seems to me that when Congress says over and over again that they care about protecting American jobs and then pass something like this, I think they are being incredibly short-sighted," Ebell said.

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