The U.S. Corporate Average Fuel Economy revision and the future of Electric Vehicle
By admin June 25, 2018

The growth of Electric Vehicles (EVs) is worth noting. EV sales have recorded an average of 32% growth annually from 2012-2016 and 45% growth over the year ending June 2017 in the U.S. Moreover, the future of global EV sales is much more bullish. Though there are debates about EV market projections, the general consensus is that EV stock will grow and take over a large portion of the market for automobiles. In 2017, OPEC, Organization of the Petroleum Exporting Countries, also revised their EV market stock projection from 46 million to 266 million. This was 500% increase than their 2016 projection.

However, challenges still exist. Currently, EV market share is less than 2% in the U.S in 2018. Though it is expected to grow in the future, the growth rate is dependent on regulatory, technical and policy changes. Recently, Scott Pruitt, administrator of the United States Environmental Protection Agency announced that U.S. Corporate Average Fuel Economy Standards (CAFÉ) will be revised, weakening its originally-planned standard. Also, Trump Administration will likely make another attempt to repeal the Electric Vehicle federal tax credit policy, which gives up to $7,500 tax credit for a purchase of Electric Vehicle.

The CAFÉ standards were first enacted by the U.S. Congress in 1975 following the 1973-1974 oil crisis. The objective of the CAFÉ standards are to oblige automakers to reach specified minimum levels of fuel economy on passenger cars and light trucks. CAFÉ standards have been very effective in terms of reducing gasoline consumption and, accordingly, greenhouse gas emission. Consumers can also save money on fuel while driving the same or further distance with greatly improved fuel economy cars.

The Obama administration strengthened the CAFÉ standards, requiring all cars to achieve roughly 50 miles per gallon by 2025. However, in April 2018, Scott Pruitt under Trump administration announced that the CAFÉ standard for 2022-2025 is inappropriate and not-achievable. A new requirement for model year 2022-2025 has not been announced, yet, it is very likely that EPA will lower the standards.

If the CAFÉ standards are to be weakened, there will be some impacts on EV adoption in the market. Possibly, the EV adoption in the U.S. will be slowed. However, it will not reverse the global EV adoption trend. Automobile markets have been globalized, and major automobile makers have to follow the global trends to do their business around the world. Even though fuel economy standards would weaken in the U.S., other countries will likely not follow suit. Other governments are continuing to push forward, setting their standards to 50 miles per gallon by 2025. These policies will likely propel the EV market, even in the absence of U.S. government support.

For more information

The Future Of Electric Vehicles In The U.S., Part 1: 65%-75% New Light-Duty Vehicle Sales By 2050

Everyone Is Revising Their Electric Vehicle Forecasts Upward—Except Automakers

EPA Administrator Pruitt: GHG Emissions Standards for Cars and Light Trucks Should Be Revised

Electric Vehicle Tax Credit Survives, but G.M. and Tesla Aren’t Cheering

How U.S. Fuel Economy Standards

Thanks for sharing !

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