Auto Manufacturers May Not Meet Fuel Economy Standards By 2025
Zacks Investment Research | Jul 18, 2016 09:20PM ET
Regulators say that US auto manufacturers are not on track to meeting fuel standards by the year 2025. At this time, the government hopes to achieve a fleet-wide target of 54.5 miles per gallon for US vehicles. The ambitious goal was set in 2012, and at that time, gasoline prices were much higher than they are now. If current trends persist, then US vehicles could have an average efficiency of 50.8 miles per gallon by 2025.
Since oil is relatively cheap, people are paying less at the pump, and that means that they are having an increased preference for buying vehicles which are less fuel efficient. The government says that this buying behavior is an obstacle which makes the desired mpg target harder to achieve. The consumption trend towards buying SUVs and pickup trucks could be curbed if oil prices do end up trending upwards between now and 2025.
According to the global automotive consulting firm IHS Automotive, auto makers are on track to spend $5-$8 billion annually to meet regulation standards. Now, while manufacturers are not on track towards meeting fuel economy standards in 2025, federal regulators do believe that it is within the capacity of US auto makers to accomplish the task.
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