New regulations on fuel economy in U.S. and compliance plans among OEMs (1)

2016 MY will see more direct fuel injection and compact engines with an increase of mini/small cars

2011/10/21

Summary

 New regulations came into force in the United States in January 2011 requiring CO2 emissions from 2016 MY light-duty vehicles not to exceed 250 gram/mile and 35.5 mpg (15.1 km/L) CAFE (Corporate Average Fuel Economy; 34.1 mpg aside from any improvements in air conditioning systems).

 In July 2011, President Obama proposed a second step of regulations for 2025 MY CO2 emissions to be 163 gram/mile and 54.5 mpg (23.2 km/L) CAFE (49.6 mpg aside from any improvements in air conditioning systems, etc.).

 This report "New regulations on fuel economy in U.S. and compliance plans among OEMs (1)" contains a summary of the 2016 MY regulations and the progress of the proposed 2025 MY regulations along with their influence and technologies addressing improved fuel efficiency likely to be introduced by automakers.

 Basically, automakers plan to meet the 2016 MY regulations by improving efficiencies of their internal combustion engines. They will focus on compact, four-cylinder engines toward that goal and, as a result, EPA and NHTSA predict that the direct injection engines will account for 60% of the gasoline engines among the 2016 MY vehicles. They also predict that the ratio of mini/small cars and CUV will increase substantially by 2016 MY.

 According to EPA and NHTSA, automakers must introduce EV (electric vehicle)/PHV (plug-in hybrid vehicle) and other game-changing, advanced technologies, in addition to relying on more efficient gasoline engines and market penetration of HV (hybrid vehicles), thereby transforming the vehicle fleet entirely if they are to meet the projected 2025 MY regulations. It is likely that there will be more incentives for EV/PHV under the 2025 MY regulations than under the 2016 MY regulations. Credits favoring full-size pickup HV are also being planned.

 The upcoming report "New regulations on fuel economy in U.S. and compliance plans among OEMs (2)" will contain concrete fuel efficiency improvement plans among automakers.

 See http://www.marklines.com/en/regulation/environment/emission_us49 for details of CO2 emissions and fuel economy regulations for 2012-2016 MY.



Targeted CO2 emissions and fuel economy levels for 2012-2016 MY announced by EPA and NHTSA

 In May 2010, the United States EPA (Environmental Protection Agency) and the NHTSA (National Highway Traffic Safety Administration) of the U.S. Department of Transportation, jointly announced the targeted CO2 emissions and fuel economy levels for 2012-2016 MY light-duty vehicles, and the announced targets became effective in January 2011. The new regulations require CO2 emissions not to exceed 250 g/mile (including reduction credited to air conditioning system improvements), which corresponds to 35.5 mpg (miles per gallon), for 2016 MY. NHTSA's targeted fuel economy level for the model year without improvements in air conditioning is 34.1 mpg, requiring a 24% improvement from 27.6 mpg in 2011 MY.

CO2 emissions and fuel economy regulations for 2012-2016 MY

Targets  The average CO2 emissions of the Light-duty vehicle [passenger cars, light-duty trucks (GVW up to 8,500 lbs) and medium-duty passenger vehicles (GVW from 8,500 to 10,000 lbs)] sold in the U.S. to be reduced to 250 g/mile by 2016 MY. This corresponds to 35.5 mpg of targeted fuel economy level needed to meet the targeted value by fuel economy improvement.
Based on
footprints
 The control level of a specific model is determined based on the footprint (the vehicle's tread multiplied by its wheelbase). EPA/NHTSA decided footprint-based attribute curves for applicable model years with the footprints along the X-axis and CO2 emissions (or fuel economies) along the Y-axis. The curve representing CO2 emissions moves downward (targeted CO2 emissions grow smaller) and the curve representing the fuel economy moves upward (targeted fuel economy values grow greater) as the model year increases.
Targets for
individual
manufacturers
 The targeted fuel economy (CAFE) in each model year will be decided for each automaker based on the targeted values of specific models as mentioned above and the anticipated mix of vehicles sold in a model year, subject to official decisions based on the actual quantities of vehicles sold. Necessary adjustments will be introduced so that the goals of 250 g/mile and 34.1 mpg are met as averages among the light-duty vehicles sold in the United States.
Source: Environmental Protection Agency/Department of Transportation (2010.5.7)
(Notes) 1. EPA is establishing CO2 emissions standards and NHTSA is establishing CAFE (Corporate Average Fuel Economy) standards. CO2 emissions and fuel economies are closely related to each other and the regulations have been drafted in such a way both could be controlled integrally. This is the first time CO2 emissions are controlled in the United States.
2. The new regulations provide for a number of credits (incentives) to preserve regulatory flexibilities. These credits include mitigation for automakers with U.S. production quantities below 400,000 units in 2009 MY, a lead-time allowance that will make it easier for automakers to adopt fuel efficiency improvement coinciding with remodeling plans that they had scheduled prior to the introduction of the new regulations, transfer of over-achieved compliance to another segment or model year, and incentives for flex fuel vehicles, EV/PHV/FCV and other vehicles incorporating advanced technologies.

 

Targeted CO2 emissions for 2012-2016 MY Light Vehicle (g/mile)

2011-base 2012 MY 2013 MY 2014 MY 2015 MY 2016 MY
Passenger Cars Targets
decided first
for 2012 MY
263 256 247 236 225
Light Trucks 346 337 326 312 298
Combined Cars & Trucks 295 286 276 263 250

(Note) EPA's targeted CO2 emissions include the effect of air conditioning system improvements. An air conditioner affects CO2 emissions in two aspects; (1) It has the risk of hydrofluorocarbon (HFC) having high greenhouse impact leaking out, and (2) it imposes additional load to the engine for purposes other than driving, thereby increasing CO2 emissions. EPA offers credits to automakers for improving (1) and (2).

(A) Corresponding fuel economy for the above CO2 emissions targets (mpg)
Passenger Cars Same as
above
33.8 34.7 36.0 37.7 39.5
Light Trucks 25.7 26.4 27.3 28.5 29.8
Combined Cars & Trucks 30.1 31.1 32.2 33.8 35.5
(Notes) 1. Accurate measurement of the fuel consumption is not easy and, hence, it is calculated on the basis of CO2 emissions using 8,887 grams per gallon of gasoline fuel and 10,180 grams per gallon of diesel fuel (the targeted values have been calculated assuming that all vehicles sold in the United States are powered by gasoline engines).
2. For example, the combined value for 2016 MY is calculated as 8,887g/gallon ÷ 250g/mile ≒ 35.5 mile/gallon (mpg), equivalent to approximately 15.1km/L.
(B) NHTSA's targeted fuel economy without improvements in air conditioning (mpg)
Passenger Cars 30.4 33.3 34.2 34.9 36.2 37.8
Light Trucks 24.4 25.4 26.0 26.6 27.5 28.8
Combined Cars & Trucks 27.6 29.7 30.5 31.3 32.6 34.1

Source: Environmental Protection Agency/Department of Transportation (2010.5.7)
(Note) As a consequence of the prohibition against NHTSA's allowing credits for air conditioning improvements, the above values (B) are the net fuel economy levels without such improvements being taken into account. These values set the basis of the average fuel economy levels in the industry and of individual automakers included in this report.


 The U.S. CAFE standards have been fixed at 27.5 mpg for 21 years from 1990 to 2010 MY for passenger cars and at 20.7 mpg for 9 years from 1996 to 2004 MY for light trucks. The new standards represent steep tightening of regulations compared to those past developments.

NHTSA's CAFE Standards (mpg)

Former regulations New regulations
1996-2004 MY 2005 MY 2007 MY 2009 MY 2011 MY 2012 MY 2016 MY
Passenger cars Fixed at 27.5 mpg between 1990-2010 MY 30.4 33.3 37.8
Light trucks 20.7 21.0 22.2 23.1 24.4 25.4 28.8
Combined 27.6 29.7 34.1

Source: NHTSA Summary of Fuel Economy Standards (2011.4.28)

 



Fuel economy targets by the segment (footprint): Improved fuel economy required of compact cars as well

 The fuel economy target for a specific model is determined by its footprint. For this reason, automakers cannot attempt to improve fuel economy of certain vehicle types to cover all. Instead, they must rely on appropriate fuel economy improvement measures on the segment basis. For example, Honda Fit with 40 sqft footprint will need to increase its fuel economy from 31 mpg in 2012 MY to 41.1 mpg in 2016 MY.

 A substantial improvement in fuel economy will be required of other models in other segments as well.

Targeted CO2 emissions and fuel economy for 2016 MY by segment

Segment Example models Footprint
(Square feet)
Targets for 2016 MY Fuel economy of
current model (mpg)
CO2
(g/mile)
Fuel
economy
(mpg)
city/highway/combined
Example passenger cars
Compact Car Honda Fit 40 206 41.1 28/35/31
Midsize Car Ford Fusion 46 230 37.1 23/33/26
Full-size Car Chrysler 300 53 263 32.6 19/31/ -
Example Light Trucks
Small SUV 4WD Ford Escape 44 259 32.9 20/27/23
Midsize Crossover Nissan Murano 49 279 30.6 18/23/ -
Minivan Toyota Sienna 55 303 28.2 19/24/ -
Large Pickup Truck Chevy Silverado 67 348 24.7 15/20/ -

Source: Environmental Protection Agency/Department of Transportation (2010.5.7), Fuel economies of current models are based on each company's website as of early October 2011 (either 2011 MY or 2012 MY).
(Note) The footprints of the sample models have been taken from their 2008 MY specifications. The fuel economy levels for current models were added as references for the purpose of this report.

 



Engines growing smaller: Four-cylinder engines accounting for 40% in 2010 MY

 The percentage of four-cylinder engines is rising among the vehicles produced in North America and sold in the United States. In 2009 MY, the ratio of four-cylinder engines exceeded that of the six-cylinder engines which used to be the most popular choice among all light vehicles. The ratio of the eight-cylinder powerplant, the icon of American automobiles, is also losing its popularity.

 Automakers are delivering compact-engine powered vehicles to the market in order to comply with the 2016 MY fuel economy regulation, and the consumers are accepting them as fuel-efficient vehicles. Direct-injection and turbocharger technologies have led to compact engines of higher performances at higher cost but are still affordable compared to hybrid or electric vehicles.

 Among the midsize sedans, V6 engines are no longer available in 2011 MY Buick Regal and Hyundai Sonata families and are replaced entirely by four-cylinder engines. It is said V6 engines will disappear by 2016 MY among midsize sedans with the exception of certain specialty cars and all will be powered by four-cylinder engines.

Domestic Light vehicles production summary by engine (U.S. market)

4 cyl. 5 cyl. 6 cyl. 8 cyl. 10 cyl. Total units
Cars 2010 MY 64.5% 4.8% 25.0% 5.7% - 4,581,253
2008 MY 57.0% 7.2% 30.2% 5.6% - 6,100,396
2006 MY 48.5% 2.5% 38.8% 10.2% - 5,866,837
2004 MY 50.1% - 42.4% 7.5% - 5,574,175
Light Trucks 2010 MY 17.7% 0.8% 47.5% 33.8% 0.2% 5,292,681
2008 MY 10.1% 1.3% 47.5% 40.7% 0.4% 7,017,596
2006 MY 8.0% 2.2% 47.6% 41.5% 0.7% 7,774,175
2004 MY 4.5% 1.1% 45.2% 48.5% 0.7% 8,370,398
Light Vehicles 2010 MY 39.4% 2.7% 37.1% 20.8% 0.1% 9,873,934
2008 MY 31.9% 4.0% 39.5% 24.4% 0.2% 13,117,992
2006 MY 25.4% 2.3% 43.8% 28.1% 0.4% 13,641,012
2004 MY 22.7% 0.7% 44.1% 32.1% 0.4% 13,944,573
Source: Ward's Automotive Year Book 2011, Automotive News 2011.7.25
(Notes) 1. According to the Automotive News of July 25, 2011, 43% of the vehicles sold in the United States (light vehicles) in the first half of 2011 are powered by four-cylinder engines, 37% by six-cylinder engines, and 18% by eight-cylinder engines. Four-cylinder engines account for more than 50% of vehicles sold in retail other than fleet sales.
2. Ford displayed a 3-cylinder 1,000 cc turbocharged engine at the Auto China 2010. The engine will be used on the Ford Fiesta to be sold in the United States.

 



Fuel economy improving technologies to be introduced by automakers by 2016 MY (as predicted by EPA/NHTSA)

 EPA and NHTSA are predicting the ratios of promising fuel economy improving technologies adopted in 2016 MY. They predict that direct gasoline injection, dual-clutch transmission (DCT), and start-stop systems will be used by all 17 automakers selling their vehicles in the United States, at likely ratios of 60%, 55% and 42%, respectively. In contrast, the predicted ratio of HV systems is no higher than 4%.

 EPA and NHTSA feel that those technologies have been established and all automakers will be able to meet the 2016 MY regulations by increasing the availability of these systems in their products.

 Two agencies assume that the cost increase per vehicle will be less than $1,000 until 2016 MY although automakers are of the view that a larger cost increase will incur. Some are saying cost increase will be as high as $1,800 to 2,000 for compact cars and $4,500 to 6,000 for midsize cars.

 The ratio of weight reducing technologies remains low at 4% in 2016 MY but it is said 10 to 15% weight reduction is necessary to meet targets for 2025 MY. Automakers are likely to make weight reducing efforts through increased use of aluminum and high-tensile steel panels to coincide with their model upgrades and parts changes.

Final penetration of technology for 2016 MY light vehicles (projection of EPA & NHTSA)

(Percent of sales)
GDI OHC-DEAC Turbo 6 speed
auto trans
DCT Start-Stop Hybrid Mass
reduction
BMW
Chrysler
Daimler
80
79
76
21
13
30
61
17
53
13
31
12
63
52
72
65
54
67
14
0
14
5
6
5
Ford
GM
Honda
84
67
43
21
25
6
19
14
2
27
8
0
60
61
49
61
61
18
0
0
2
6
6
3
Hyundai
Kia
59
33
0
0
1
1
8
0
52
52
32
4
0
0
3
2
Mazda
Mitsubishi
Nissan
60
74
66
0
0
7
14
33
11
17
14
2
47
74
62
41
74
58
0
0
1
4
6
5
Porsche
Subaru
Suzuki
83
60
77
15
0
0
62
9
0
5
0
10
45
58
67
62
44
67
15
0
0
4
3
4
Tata
Toyota
VW
85
26
82
55
7
18
27
3
71
14
13
10
70
40
68
70
7
60
15
12
15
5
2
4
2016 MY overall 60 13 15 12 55 42 4 4
2011 MY overall 11 2 6 16 7 3 2 0
Source: Environmental Protection Agency/Department of Transportation (2010.5.7)
(Notes) 1. The ratio of 6-speed AT in 2016 MY is lower than that in 2011 MY because some of the systems will be replaced by more efficient DCT and hybrid systems.
2. In addition to the technologies shown above, diesel engines are adopted by five automakers (BMW, Daimler, Mazda, Porsche and VW) in 1% of overall sales.
3. Tata represents Jaguar/Land Rover.

 

 In December 2010, NHTSA requested automakers to report their plans to adopt fuel economy improving technologies, shown below, to gain insights for establishing details of its fuel economy standards for 2025 MY.

NHTSA's Request for Product Plan Information - model years 2010-2025

Low Friction Lubricants 7+ Speed Auto Transmission or 7+ Speed DCT
Engine Friction Reduction Electric Power Steering
VVT - Intake Cam phasing 12V Micro-Hybrid
VVT - Dual Cam Phasing Belt mounted Integrated Starter Generator
Discrete Variable Valve Lift Crank mounted Integrated Starter Generator
Continuously Variable Valve Lift Strong Hybrid
Cylinder Deactivation on DOHC Plug-in Hybrid
Stoichiometric Gasoline Direct Injection Electric Vehicle
Turbocharging and Downsizing Fuel Cell Vehicle
Exhaust Gas Recirculation (EGR) Mass Reduction
Lean Burn Direct Injection Low Rolling Resistance Tires
Advanced Diesel Low Drag Brakes (Note 2)
6-speed Auto Transmission Secondary Axle Disconnect (AWD)
Dual Clutch Transmission Aero Drag Reduction (Note 3)
Source: NHTSA "Request for Product Plan Information-Model Years 2010-2025 (2010.12.17)"
(Notes) 1. NHTSA is asking automakers to indicate whether they may adopt these technologies, if so, when they will adopt them, applicable vehicle type segments, costs, effect of improving fuel economy, etc.
2. Due to their structural restriction, the pad and the rotor of the disk brake are slightly contacting each other constantly while the vehicle is running normally. This inevitably causes a rotational friction, a drag, in the rotor which, in turn, affects the vehicle's fuel economy. If a large gap is provided between the pad and the rotor, rain and snow may fill it and impair safety. The low drag caliper is designed to optimize the gap in the order of microns and thus contributes to fuel economy improvement.
3. Aero drag reduction is realized by a shutter in the grille that opens to cool the engine when the vehicle is travelling at low speed, and closes in high-speed travel to reduce aero drag. This technology is adopted in Chevrolet Cruze Eco (called "automatic air shutter system" by GM with 42 mpg highway fuel economy) and Ford Focus SE with SFE package ("active grille shutters" with 40 mpg).

 



Predicted vehicle sales by the segment in 2016 MY: A substantial increase expected for mini/small cars and CUV

 EPA and NHTSA have announced their prediction of vehicle sales by the segment in 2016 MY. According to the prediction, the total demand for light vehicles will catch up and reach 16,550,000 units and the ratio of passenger cars will rise from 51% in 2008 MY to 57%. As far as passenger cars are concerned, the percentage of full-size cars will decrease while those of mini cars and small cars will rise substantially. The light truck segment will see a decrease of SUV and continued increase of CUV. The agencies further predict that full-size pickups will maintain the current sales quantities.

Estimated Annual sales of 2016 MY Light Vehicles by Segment

(units)
Cars Light trucks
2008 MY 2016 MY 2008 MY 2016 MY
Full-size Car
Luxury Car
Mid-size Car
829,896
1,048,341
2,166,849
530,945
1,548,242
2,550,561
Full-size Pickup
Mid-size Pickup
Full-size Van
1,331,989
452,013
33,384
1,379,036
332,082
65,650
Mini Car
Small Car
Specialty cars
617,902
1,912,736
459,273
1,565,373
2,503,566
769,679
Mid-size Van
Mid-size MAV
small MAV
719,529
110,353
231,265
839,194
116,077
62,514
Full-size SUV
Mid-size SUV
Small SUV
559,160
436,080
196,424
232,619
162,502
108,858
Full-size CUV
Mid-size CUV
Small CUV
264,717
923,165
1,548,288
260,662
1,372,200
2,181,296
Total 7,034,997 9,468,365 Total 6,806,367 7,079,323
Source: Environmental Protection Agency/Department of Transportation (2010.5.7)
(Notes) 1. The segment totals and the grand total for MY 2016 do not agree but are shown as documented. The total of light vehicles (cars and light trucks) for MY 2016 is 16,547,688 units.
2. MAV stands for a Multi Activity Vehicle.

 



More incentives for EV/PHV/FCV under 2025 MY standards

 On July 29, 2011, President Obama proposed a second step of 2016 MY regulation calling for the average CO2 emissions of 163 g/mile and fuel economy of 54.5 mpg (23.2 km/L) for 2025 MY light vehicles (NHTSA's net fuel economy standard without improvements of air conditioning system, etc. is 49.6 mpg).

 Prior to the announcement of the proposal, it was agreed through consultation among the U.S. government, Detroit Three and other automakers, UAW and other relevant organizations, on alleviating the targeted value itself for full-size pickups, offering incentives for full-size pickup hybrid vehicles, etc.

 EPA and NHTSA are planning to introduce incentives for EV/PHV/FCV since it is important for automakers to adopt advanced technologies and transform the vehicle fleet sold in the United States in order to achieve the goals for 2025 MY. The agencies are also considering credits (incentives) for active grille shutters and certain other fuel economy improving technologies, considered effective although unverifiable in today's test procedures, to promote the early market penetration.

 The 2025 MY standards were originally to be announced by EPA/NHTSA in September 2011 but the date was postponed to November. The final rules are expected to be decided in July 2012, five years prior to the enforcement.

Policies of establishing CO2 emissions and fuel economy standards for 2017-2025 MY

Targeted levels  The average CO2 emissions of light-duty vehicles sold in the United States to be 163 g/mile in 2025 MY (equivalent to 54.5 mpg fuel economy). NHTSA's targeted fuel economy is 49.6 mpg without accounting for air conditioning system improvements, etc.
 Rules for specific models to be based on footprints as now.
Mid-term review (Note 1)  Given the nine-year long time frame of standards for 2017-2025 MY vehicles, EPA and NHTSA will conduct a mid-term review of the 2022-2025 MY standards before final rulemaking in April 2018.
Mitigation and
incentive plans
Off-Cycle
Credits
 EPA and NHTSA will provide credits (preferential treatments) for the technologies the effect of which is not appropriately accounted for in today's tests, including the Active grill shutters, High efficiency alternators, High efficiency lights, Start-stop, Solar roof panels for charging EV/PHV, etc.
EV/PHV/FCV
(Note 2)
 EPA will consider CO2 emissions from EV/PHV (electric mode) and FCV sold in 2017-2021 MY to be 0 g/mile with no limit on the quantity of vehicles. Limits will be placed (established separately) for 2022-2025 MY and production in excess of limits will be subject to CO2 calculation which reflects net increase in upstream CO2 emissions (attributable to electric power generation).
 Each EV/FCV sold in 2017 MY will be counted as two (this multiplier will be reduced to 1.5 in 2021 MY) and each PHV as 1.6 (1.3 in 2021 MY).
Air-conditioning
credits
 EPA provides credits of up to 18.8 g/mile for passenger cars and 24.4 g/mile for light trucks for reduction of CO2 emissions (same standards as for 2016 MY) resulting from air conditioning system improvements through reduction of HFC leakage and engine loads.
Incentives for
Full-size
Pickups
Targeting  Admitting that early enforcement of stringent fuel economy standards will be difficult for full-size pickups compared to passenger cars or other light trucks, NHTSA intends to set the average yearly increase of the targeted fuel economy standard for larger light trucks in 2017-2021 MY lower than the 2.9% average of the light truck fleet (targeted fuel economy for smaller light trucks will be increased by higher rate than average of 2.9% per year). The fuel economy in 2022-2025 MY will be increased by an average of 4.7% for the light truck fleet.
Preferential
treatment of HV
(Note 3)
 Regarding the hybridization of full-size pickups, EPA will give 10 g/mile credit per unit in 2017-2021 MY for mild HV and 20 g/mile per unit in 2017-2025 MY for strong HV.
Source: EPA and NHTSA Supplemental Notice of Intent (2011.8.9), Automotive News 2011.7.11/8.1/8.8
(Notes) 1. Automakers will be able to meet the targeted standards for the first half of the 2017-2025 MY regulations primarily by improving their internal combustion engines but a significant introduction of electric vehicles will be necessary to meet the standards for the second half. It is said the automakers intend to confirm, at the middle of the regulation period, the market acceptability of electric vehicles (customers' reaction to price increase, readiness of charging infrastructure, etc.).
2-1. The incentives for EV and other vehicles for 2012-2016 MY consider CO2 emissions to be zero for the first 300,000 vehicles in the five-year span for automakers having produced 25,000 or more EV/PHV/FCV in 2012 MY (or first 200,000 vehicles for automakers producing less than 25,000 units of applicable vehicles). The amount of upstream CO2 emissions will be calculated for production in excess of such limits.
2-2. The multiplier incentive planned for 2017-2025 MY is not provided for 2012-2016MY.
3. Full-size pickups are currently sold in the United States by GM, Ford, Chrysler, Toyota and Nissan but GM is the only automaker with HV availability. In August 2011, Ford and Toyota announced a joint development plan of the next-generation HV system for rear-wheel drive light trucks.

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