NADA Urges Regulators to Confront Affordability Problem in Fuel Economy Mandates

TRAVERSE CITY, Mich. (Aug. 2, 2016)-NADA 2016 Regulatory Affairs Chairman Wes Lutz on Tuesday joined other automotive industry leaders in warning regulators about the significant costs to consumers of implementing overly aggressive fuel economy standards.

Speaking at the Center for Automotive Research Management Briefing Seminar in Traverse City, Mich., Lutz explained that new vehicles are already becoming unaffordable for millions of consumers, and he urged regulators to consider that reality before adopting stringent fuel economy mandates that will only add thousands of dollars to prices of all new cars and trucks. 

“The manufacturers have sounded the warning: The drastic upswing of the miles-per-gallon compliance curve from now until 2025 is going to have a dramatic effect on vehicle prices - and not just on the most fuel-efficient vehicles in the fleet, but up and down the entire lineup,” said Lutz, who is also the president of Extreme Chrysler/Dodge/Jeep, RAM Inc. in Jackson, Mich. “Every car, every truck, every SUV could soon be $5,000 more expensive than it is today. On an average 60-month contract, $5,000 increases the monthly payment by approximately $100.”

“Our industry is proud to have repeatedly met and exceeded currently regulatory requirements for fuel economy, and our customers have told us that they're very pleased with the progress that's been made in miles per gallon,” Lutz said. “But as dealers, our top priority will always be providing our customers with the ability to purchase the fuel-efficient cars they need at a price they can afford.”

And affordability is already a significant problem, Lutz pointed out.

“Americans are maxed out, and can barely afford new cars as-is,” Lutz said, citing a recent study by Bankrate.com concluding that a median-income household cannot afford the average price of a new vehicle, which is now $34,000, in any of the 50 largest cities in the country.

“I'm seeing this every day at my dealership in three major ways: consumers driving their current vehicle longer; buying used vehicles; or buying a vehicle that doesn't fit their needs,” Lutz said.

What regulators need to remember, Lutz said, is that the cost of significantly increasing fuel economy compliance will price millions of Americans out of the new-car market, ultimately leading to the sale of fewer fuel efficient vehicles year-to-year.

“The reality that we must confront - as retailers, as manufacturers and especially as regulators - is that affordability is everything. And we ignore that reality at our own peril,” Lutz said “Remember, we can design and build all the fuel-efficient cars and trucks we want, but real life fuel economy improvements can't be achieved until consumers actually buy those new vehicles.”