Business Costs & Regulation

Government to Mandate 60 MPG

Even today's fuel sippers will seem thirsty when the Obama administration is done with its overhaul of mileage rules.

Within a month, federal regulators will set the wheels in motion to more than double the current standard for mileage per gallon. By 2025, automakers' fleets will have to average 60 miles per gallon, versus 27.5 mpg for passenger cars and 22 mpg for trucks (including big SUVs and pickups) that are made today.

It's part of Obama's push to slow and eventually reverse the growth of U.S. oil imports while also reducing carbon dioxide emissions. Automobiles are a close second to the electric power industry as the largest source of carbon dioxide, a gas the U.S. considers a hazard, asserting that it promotes global warming. By executive fiat, the administration already has required that, starting in the fall of 2015 for 2016 models, automakers' fleets get an average of at least 35.5 mpg, regardless of vehicle sizes and weights. An official proposal of the next boost, to 60 mpg by 2025, will come from the Department of Transportation (DOT) and the Environmental Protection Agency (EPA) by October and will be locked into regulations by fall 2011.

To boost vehicles' fuel efficiency beyond 40 mpg, manufacturers will have to tweak gasoline engines by using small turbochargers, advanced fuel injection and ultralight steel, plastics and composite fibers.

They also effectively face a mandate to rev up development of ultra-high-mpg electric plug-in cars and hybrids such as the Chevy Volt, which is set to roll out by December and uses a small gasoline-fueled motor to recharge an onboard battery. Advanced hybrids getting the equivalent of 100 mpg or more will be a must for automakers to reach a minimum fleet average of 60 mpg by 2025. Just to meet the 35.5 mpg standard for 2015, automakers likely will be producing around 1 million gasoline-electric and plug-in cars a year by 2015. It's no coincidence that the DOT and EPA are considering revamped auto sticker labels that highlight plug-in and hybrid vehicles' seemingly astronomical fuel efficiency.

Although a fleet with many Volt-type hybrids might be sufficient to meet the much higher mpg standard that will be required by 2025, it probably wouldn't toe the line on carbon dioxide emissions -- one reason automakers will continue to face pressure to make all-electric-powered plug-in cars.

So they'll step up R&D and lean more heavily on suppliers and contract with others such as A123 and Compact Power to develop batteries that will enable cars to run for several hundred miles between recharges. (The Chevy Volt will be able to travel only 40 miles before the gasoline engine kicks in.)

In addition, expect a push to install tens of thousands of recharging stations in cities, suburbs and along roadside service areas, as well as in car owners' garages. That will increase sales for manufacturers such as AeroVironment and Coulomb Technologies. It should also give a boost to companies such as Better Place, which will embark on a nationwide buildout of mini-stations where motorists can quickly exchange batteries low on juice for fresh ones, as they do now with propane tanks.

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