Friday, June 17, 2011

Obama’s New “Green” Car Mandates Could Add $10,000 To Vehicle Prices, Eliminate 260,000 Jobs

Hundreds of thousands of jobs lost. Millions of dollars in extra expenses. Less economic activity.

Yeah, it sure sounds like Obama policy.

The Detroit News’s dogged David Shepardson has unearthed a study by one of world’s most respected automotive research firms that reveals that President Obama’s radical CAFE mandate that vehicles average — average! — 62 MPG by 2025 “could force vehicle prices up by nearly $10,000, reduce sales by 5.5 million vehicles annually, and eliminate more than 260,000 jobs.”

Shepardson is quoting from the Michigan-based Center for Automotive Research and the 260,000 job loss figure (consistent with past job losses from CAFE rule hikes) is another dent in White House’s propaganda that Green creates jobs.

The CAR study also reveals that Obama’s NHTSA and EPA have been gaming the figures when it comes to the cost of their new rules. The center’s study predicts it will cost between $3,744 and $9,790 per vehicle, while the agencies have low-balled the figure at $770 to $3,500 per vehicle.

The resulting costs would shrink the new-car market, with 5.5 million potential buyers disappearing (and manufacturing jobs with them) by 2025. That assumes that the auto fleet can even be built to meet such an absurd spec. Currently, no car — much less the average — meets 62 mpg. Indeed, only a handful of small vehicles meet the 35-mpg fleet-wide standard mandated in just five years.

I’ve never quite understood why the government feels the need to mandate efficiency. As if society, by nature, didn’t want to be more efficient.

CAFE standards are predicated on the notion that, were it not for the government, fuel efficiency wouldn’t improve. But fuel efficiency does improve, to the extent that’s reasonable. And who decides what is reasonable? The market.

If I could go out tomorrow and buy an SUV that performs the same way my current SUV does but gets 70mpg I’d do it in a heartbeat, and so would everybody else in the market. We don’t like big fuel bills. But the reason why there isn’t an SUV that gets 70mpg is because the technology doesn’t exist hit that threshold without sacrificing a lot of the other things people like in their SUV’s. Like size. Ruggedness. Off-road capability. Towing capacity. Horsepower.

So we, as consumers, accept lower fuel efficiency for these other considerations. But when the government mandates fuel efficiency, we’re forced to sacrifice those considerations to meet some arbitrary goal set by the politicians.

The markets always find the right balance between value, efficiency and price. The only thing government can do is distort that balance and make things worse.