Ford Verve Concept car
Ford Verve Concept vehicle demonstrates one pathway to higher fuel economy as highlighted in the Ceres/CITI-sponsored studies.

42 MPG Spells Profits

Studies find that 42 mpg fleet average by 2020 will be good for U.S. carmakers.

By Ceres.org

It really sounds counter-intuitive, but increasing U.S. Corporate Average Fuel Economy for light cars and trucks to 42 miles per gallon (5.6L/100 km) by 2020 will not only save consumers a lot of fuel, reducing US oil imports, but will actually spur auto industry profits, especially for the "Detroit Three."

That's the findings of two studies sponsored by CITI Investment Research and Cere's Investor Network on Climate Risk. Traditionally, investment advisors have argued that increasing fuel economy standards will drive down industry profitability, a conclusion that the four key groups involved in this latest research refute. With Ceres Senior Manager of Transportation Programs Carol Lee Rawn taking the lead in the accompanying press conference, which is available in MP3 format both here on EV World (right-hand column) and on the Ceres.org web site, Walter McManus, Alan Baum, Dan Meszler and Lily Donge explain their respective roles in both studies, at which point, media representatives are invited to ask question. The entire conference is just under 60 minutes in length. Below are the key findings of each study.



Profits Ahead

The University of Michigan's Walter McManus and his group at the Transportation Research Institute calculated variable profits for the industry as a whole at $9.1 billion with the "Detroit 3" sharing 56% of that, or $5.1 billion, due largely, again counter-intuitively, to the sale of larger, more fuel efficient cars and light trucks compared to their foreign competition. Improving the fuel efficiency of a large car or pick-up, which happen to be more profitable to build, also results in greater overall fuel savings.

In conclusion, the group makes the case that the government needs to enact the 42 mpg standard being debated now by the EPA. It will not only result in reduced petroleum consumption, better environmental quality, but also improved profits to car makers at an estimated incremental cost per vehicle of just $945.

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Times Article Viewed: 3144
Published: 31-Mar-2011


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