NAIAS 2016 – CAFE Before Beauty

On January 31, 2016 by WMac

The data is coming in from the Year of our Lord 2015, and it is downright rosy.  In the good ol’ U.S. of A., 17.47 million light-duty vehicles were sold last year, more than any other year, ever.  It’s a proud recovery from the subprime-mortgage/credit-default-swap economic disaster of 2008-2009, when auto sales were a mere 10.4 million…a number so staggeringly low it had not been seen since twenty-seven years prior, in 1982.

These glowing numbers, along with the astonishingly low price of oil, which as of this writing is under $28/barrel (the lowest it has been in about 13 years), have automakers licking their chops for 2016.  Cheap barrels of oil mean cheap gasoline at the pump, and this means car-buying consumers will spring for bigger, thirstier, higher-profit-margin vehicles.

With their bottom lines thusly secured, the factories have time and money to experiment with flashy, low-volume propositions, and that means the stuff on the floor at the North American International Auto Show this January is just breathtaking.  So breathtaking, in fact, that on January 23rd, President Barack Obama became only the third sitting President to visit the NAIAS in Detroit.

“Seven years ago,” he tweeted, alongside some stats about the industry, “I bet on American workers and the American auto industry. I’d make that bet again any day of the week.”  He additionally noted in announcing his visit that he wanted to see the industry’s progress “firsthand.”

When you see pictures of the Buick Avista concept, or perhaps the new Ford GT, you realize why he wanted to do that.

2016-Buick-Avista-Concept-003

Ford-GT-2016-NAIAS

I wanna go see those too.

One thing that popped into my head, though, as I saw the oil news and the car-sales news running simultaneously, was that government and industry might soon be at loggerheads over the Corporate Average Fuel Economy (CAFE) standards.  CAFE is fairly complex and touches on a lot of definitions and measurements and credits (if you’re having trouble sleeping, check the relevant US Code here), but it boils down to the government wanting to “reduce energy consumption by increasing the fuel economy of cars and light trucks.

CAFE estimated fuel saved

The government’s intent is all well and good, but manufacturers generally want to produce a full spectrum, or full line, of vehicles.  Because of the way the CAFE standards are written, larger vehicles don’t have to make the same MPG as small vehicles, but my understanding is that the manufacturer still has to hit a certain average across its entire range.  Therefore, the manufacturer must fairly accurately forecast how many of each vehicle they will sell, and obviously this can be quite difficult to do.  If, for example, the cheap gas means that suddenly Fiat-Chrysler is selling too many fuel-guzzling Ram pickups and not enough fuel-sipping Dodge Darts, for example, that reality will drag down their corporate fleet MPG average and subject them to federal fines.  Unfortunately that very issue is already causing a problem for that very company.

So while as a car enthusiast I eagerly await the design, and powertrain, and technological largesse that always comes along when the industry is doing well, I also equally hope that the automakers can muster the conservatism and foresight enough to weather the next storm, whatever form it might take.  So bring on those svelte coupes and supercars, guys…but build a few holding tanks in a vault somewhere to stash some liquidity in reserve, huh?

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