Change for the Automotive Industry

Source: ZeoCars

With the rising cost of gas prices and depleting oil sources, many people are wondering what is going to happen to the future of the automotive industry. President Obama has declared that all cars must have a 54.5mpg fuel economy by the year 2025. Obama has stated that, “This agreement on fuel standards represents the single most important step we’ve ever taken as a nation to reduce our dependence on foreign oil.” Major companies that make up over 90% of the vehicles purchased in the United States such as Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo are working with this agreement.

This is a very difficult goal to reach and many fear that this could hurt the automotive industry. Volkswagen has already spoken against the deal stating that it is unfair that smaller passenger cars must comply with heavier standards while heavier light trucks will have flexible standards. Tony Cervone, the Volkswagen executive vice president made an official statement where he has pointed out that passenger cars have to improve by 5% annually while light trucks only have to improve by 3.5%. Volkswagen wants the president to come up with a “one nation standard” so that it is fair and equal to every company.

What will this new standard mean to consumers of the automotive industry? The White house predicts that consumers will save $1.7 trillion dollars in gas money and $8,000 dollars per vehicle by 2025. It is also predicted that over 6 billion metric tons of greenhouse gas pollution will be eliminated. Some feel that this standard to too good to be true and will be impossible to reach. There exists the fear of job losses with the loss of big trucks and unaffordable hybrid cars.

Currently there are only a few regular cars that can reach over 26mpg. Audi has been working on using lighter weight materials to improve gas mileage. There are several downfalls of using lighter weight materials. Lighter weight materials tend to be more expensive and not as durable; therefore concerns for safety and cost arise. Audi’s A8 luxury sedan has a light weight all aluminum body but the cost is expensive as it starts at about $80,000. Many Americans can simply not afford an $80,000 vehicle.

Other car companies have been working on creating hybrid and electric vehicles. BMW is launching a new set of all electric vehicles called the i Series of vehicles, the i3 EV and i8 PHEV. Nissan also has an all-electric car called the LEAF but is limited in quantities. Technology for electric vehicles will have to be improved as there is not yet an electric car that can go over 150 miles on one charge. There are also not many electric car-charging stations in the United States, making it inconvenient to own an electric car. Hybrid vehicles seem to have the most potential of reaching President Obama’s mpg requirement as Toyota’s Prius hybrid-electric vehicle rates at 48mpg. Overall this government mandate will bring change to the automotive industry but only time will tell if consumers will be able to afford it.