The Facts Don't Lie: Fuel Efficiency and Car Sales Both on the Rise

August sales data reconfirms that current stronger fuel efficiency standards are already working for consumers. Gas prices and fuel efficiency are up, but so are vehicles sales. What’s going on here?

This morning’s New York Times sheds light on this question, simply entitled “Gas Prices Rise, but So Do Auto Sales.”  The piece notes that August sales figures show very strong sales growth, jumping 19.9% year-over-year.  Sales-weighted fuel efficiency of new vehicles sold in August jumped by 0.2 mpg over the previous month, according to the University of Michigan. And yet, auto sales growth persisted despite increasingly high gas prices, a historical anomaly for the U.S. auto sector. 

Ths time around potential buyers are finding that many new models are far more fuel efficient than the ten-year old cars they currently own, providing a compelling reason to upgrade--saving money at the pump. With the average age of cars and trucks on U.S. roads is over 11 years, there is a massive amount of pent-up consumer demand for new vehicles. As noted in the NY Times article:

“The choices for fuel efficiency are so plentiful it’s harder for a consumer to walk away because of gas prices,” said Jesse Toprak, an analyst with the auto research site TrueCar.com.

This trend is consistent with what Baum and Associates, an auto industry analyst, found that the average fuel efficiency of new passenger vehicles sold in the first half of 2012 hit a record high of 23.8 mpg.  Significantly, Baum and Associates found that record number was reached without a major increase in small car sales; instead, virtually every auto and truck segment has seen great fuel efficiency gains, so that consumers are no longer forced to purchase smaller cars to save money at the pump.

As I’ve noted in this space a number of times previously, automakers are now better-positioned than ever before to meet drivers’ demands for more fuel-efficient vehicles.  In large part, the auto industry’s newfound resilience can be attributed to a more stable regulatory and investment environment as a result of the historic 35.5 mpg average carbon pollution and fuel efficiency standards brokered in 2009 by the Obama Administration and agreed to by the major automakers, Caifornia, UAW, environmental leaders, and other key stakeholders.  This stability and predictability will continue beyond 2016 thanks to the new 54.5 mpg  by 2025 standards finalized by the Department of Transportation and the Environmental Protection Agency just last week.

The model year 2012-2016 standards have already  given automakers the regulatory certainty they need to make strong investments in fuel efficiency, with the number of fuel-efficient models sold in the U.S. doubling from 28 to 60 since 2009 when the standards were announced. 

The final two paragraphs of the NY Times article summarize things up well:

Analysts said the overall industry results exceeded expectations. The consistent level of demand throughout the year has helped the companies keep inventories stable and sales incentives relatively low.

“The more predictable the market is, the better it is for product planning and marketing,” Mr. Toprak said. “The fact is, predictability is what this industry has been lacking for the past four years.”

The bottom line then is that, thanks in large part to the predictability of standards, automakers are building the cars that consumers want to buy.  The standards are meeting and exceeding expectations, with the year-to-date sales weight average of 29.0 mpg for model year 2012, far exceeding the agency’s forecast of 28.7 mpg.  Higher MPG models are driving sales growth, which in turn are driving job growth in the auto industry.

To overturn the progress we’ve already made would risk slamming the door on current and future economic growth, a cleaner environment, and strengthened local communities.

About the Authors

Roland Hwang

Director, Energy & Transportation program

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