Thursday, August 25, 2005

Renovating the Truck CAFE

by Tom Bozzo

The National Highway Traffic Safety Administration, which apart from its namesake portfolio is responsible for establishing such automobile fuel economy standard as we have, has issued a lenthy notice of proposed rulemaking (169 pp. PDF) describing changes to the fuel economy standards for "light trucks" to be phased in over the 2008-2011 model years. The present single fuel economy standard for trucks, which is less stringent than that for "cars" (21.6 MPG versus 27.5 MPG for MY 2006, increasing to 22.2 MPG for MY 2007), would be replaced with a six-tier standard in which vehicles with larger "footprints" would face lower fuel economy standards than smaller models. During the phase-in period, the single-tier standard would increase to 23.5 MPG by MY 2010.

In particular, the proposed standards for the two smallest truck categories would be close to those for cars, which is advertised as having the benefit of reducing incentives to game the CAFE system by reclassifying cars as trucks. However, the complexities of the multi-tiered system are such that there is ample confusion as to the likely effects of the rule change, should it be adopted, and some suspicion that it might not do much if anything to improve fuel economy standards. There is some merit to the cynical view, as I'll note below.

What's perfectly clear is that the proposed rule is intended as a gift to the domestic automakers' large truck lines, which would indeed face a lower standard than the current regulations provides (hat tip, Ken). Whether it will end up mattering at all depends on the path of oil and gas prices. The start of the fuel price spike seemed to offer a little preview of Truckageddon, at least until the employee discount sales (in which trucks were discounted much more heavily than cars) stuck a finger in the leaky dam at the cost of moving the trucks at something a lot closer to cost than was typical of the Big Three's SUV glory days. It also is a bit of a stick in the eye to Japanese makers, including Honda and Toyota, who sell large numbers of relatively fuel-efficient car-based crossover SUVs; with the multiple size tiers, they get higher MPG targets for their trouble.

The ease with which the current regulations are gamed by classifying car-based vehicles as CAFE trucks would make a real effort to reduce the incentives to torture the rules a welcome change. In this regard, the carlike MPG standards for small trucks give something, but another part of the rule change affecting the definition of trucks perhaps could take away a lot.

There are a couple of loopholes through whcih cars and car-like automobiles can get classified as trucks for the purpose of fuel economy regulations. One is that a vehicle whose seats can be easily removed and replaced, using simple tools, to create a flat cargo floor may be classified as a light truck. This is the provision through which many minivans, and car-based wagon-styled confections such as the Chrysler PT Cruiser and Chevrolet HHR, gain light truck status. Second, "off-road" vehicles, defined as automobiles with four-wheel drive that meet several ground clearance standards, may also be classified as light trucks. This provision was used to reclassify the Subaru Legacy Outback wagon as a "truck" as of its recent redesign.

The car-like standards under the proposed regulations would apply to trucks with "footprints" (the product of the wheelbase and track) up to 43 square feet (26.8 MPG in MY 2008), and from 43 to 48 square feet (25.6 MPG). Above 48 square feet, the MPG standards are no more (or even less) restrictive than the current regs (20.4-22.3 MPG). All would increase gradually through MY 2011. In particular, these put small SUVs nearly on par with the 27.5 MPG car standard.

NHTSA chose footprint over weight and "shadow" (the total area under the car) to establish the tiers on the claim that footprint is difficult to alter without a major redesign. Certainly, length and width can be cosmetically manipulated at low cost — we are spared the ugly bumper protrusions of the seventies coming back into fashion, at least. Of the footprint measurements, wheelbase is more difficult to manipulate than track, depending on the extent to which a vehicle platform is designed to be stretched. With some suspension mods and fender flares, it's not too hard to give a vehicle the square foot or so of footprint it might need to hop into the next category. You could imagine, though, that the first redesign cycle under these regs would tend to yield wider-track, longer-wheelbase SUVs.

The Times noted in the article linked above that the Outback (MPG ranging from 19/24 to 23/28 depending on powertrain) is just under 43 square feet, and would thus be a candidate for modifications that would bump it over the first threshold. While the 1.2 MPG difference between the MPG standards for the up-to-43 and 43-48 sq. ft. tiers may not seem like much incentive to manipulate the Outback's footprint, since Subaru's Tribeca SUV (18/23 MPG) is just under 47 square feet, they'd benefit from being able to average the two lines by putting them in the same size class. Likewise, if BMW could convince NHTSA to classify the 325xi wagon (around 44 sq. ft.) as a "truck," its decent fuel economy could be averaged with the relatively gas-guzzling X5 SUV (just under 48 sq. ft.).

The transition to truck-like MPG at 48 sq. ft. also looks to potentially benefit a number of mid-sized domestic wagon-like cars. The long-wheelbase version of GM's mid-sized front drive platform (as in the Chevrolet Malibu Maxx) has a footprint of nearly 47 sq. ft. Moving over 48 sq. ft. would provide close to the current CAFE car-truck gap for a reclassification incentive, plus would permit averaging with some mid-size SUVs

If I were an environmental group commenting on the proposed regs, I'd be keen on moving that size cutoff over 50 sq. ft. — at which point it would be harder to get midsized cars into the size class — argue for a smaller MPG step between the second and third-smallest size tiers, or both.

Now the ability to migrate wagons to the truck category depends, you might say, on the manufacturers' ability to get NHTSA to believe that their wagons are trucks and not cars. That is where an additional provision of the proposed rules comes in: NHTSA wants to clarify that the flat cargo floor provision in the light truck definition can be met with folding, but not necessarily removable, seats.

This is advertised as mainly affecting minivans, and remedying a consistency-of-regulation issue whereby folding-seat minivans could be put at a disadvantage relative to removable-seat minivans, were it necessary to classify them as passenger cars rather than light trucks. NHTSA also argues that folding seat minivans may be safer, as they reduce the likelihood of incorrect re-installation of the seats. All well and good.

However, the folding seat regulation would also potentially enshrine a gambit Daimler Chrysler attempted to use to classify its manifestly car-based Dodge Magnum wagon as a light truck via its flat-folding back seats. (I haven't been able to determine through a cursory search whether Dodge actually prevailed.) Put simply, there doesn't seem to be an easy way to prevent a flat-folding seat regulation intended to apply to minivans from extending to any wagon with suitably engineered back seats.

Indeed, wagons have been getting flatter-folding seats if only for the market-driven utility value of the flat cargo floor. You'd have to think that if the folding seat provision survived the rulemaking process without a clarification limiting its applicability to station wagons, only a sucker of a car maker wouldn't take appropriate steps to ensure that its mid-sized wagons met the light-truck definition. Permitting widespread cross-over of wagons into the light truck CAFE category would do a lot to subvert the cause of fuel economy.

At this stage, it's too early to say whether the fuel economy rules will be an item for Jonah Gelbach's new Faint Praise series, or just plain damnation. Given the administration's proclivities, it's always safe to be on the lookout for the latter.

But if you've made it this far, it should be clear that many of the complexities of CAFE rules don't obviously do much to promote fuel economy. You'd have to say that if you really wanted to send the signal that people should save fuel, you'd tax it, rebate some portion to mitigate the effect on the poor, and use the balance to add some much-needed revenue to the Federal budget. Since that's a political non-starter, we just have to take what we can get.
The problem with taxing then giving it back is that people don’t really focus on what percent of what tax they are really getting back.

I agree with you about the price of gas.

A car is a lot like a fridge; if you have non-energy star(ish) appliance, you pay more for electricity. There is a market incentive to open your fridge less often (not likely) or have a more efficient fridge (more probable if you can afford it). That translates to drive to work fewer days a week or get a more fuel efficient car (less public transit).

Technically, the problem isn’t the price of gas, it’s the amount we waste foolishly by leaving the fridge door open.

Maybe we can offer tax rebates for mass-transit fairs the same way we can deduct student/home loan interest from our taxes even if we don’t itemize? That’s a direct and recognizable deduction of our “burden.”
That's a good point about the psychology of a refunded gas tax -- people may well to focus on the $5/gallon pump price and forget that they're getting $2-something of that back elsewhere.

I wouldn't have a problem with additional subsidy of mass transit -- it could have some of the desired effect by improving some combination of price and convenience between mass transit and private vehicles. There'd still be the issue that the underpricing of fuel (relative to the total social cost) would promote inefficiently high consumption.

I don't doubt that a better system of efficiency standards could help, and as I've said, I don't think a tax is politically feasible, so some system of efficiency regulations is what we'll have.

But as an economist, I have to believe that sooner or later, people who don't really "need" gas guzzlers will sooner or later decide to stop paying through the nose (and/or giving up other things) for the "conveniences" of driving everywhere and for everything.
I hope the Elasticity of SUV Demand comes into play as ownership costs rise, but I think there's a lot of non-market forces persuading people to buy SUVs... Prestige, Safety, small penises... etc.
Hee hee.

Several of GM's 2006 large SUVs have been added to the employee discount program, to the alarm of some analysts, suggesting that the land yachts are needing a lot of support at present gas prices.

While you may consider those factors "non-market," basic consumer choice economics does suggest that those characteristics have "shadow" prices, and since those are generally not infinite, people will subsitute (or invent) cheaper methods of penis enlargement.
people will subsitute (or invent) cheaper methods of penis enlargement

They already do that - I get many such offers ending up in my spam filters every day *grin*
Welcome, David -- and, uh, since you mention it, my spam is rather depressingly single-minded. You'd think someone would figure out how to make a buck off the U.S. fuel price spike.

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