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Obama Phase II CAFE Proposal and the Aftermarket

Aftermarket Business World...December 2011

     You'd have to be a college math professor to understand the formulas and factors the EPA and NHTSA propose to use in determining whether autos and trucks meet Corporate Average Fuel Economy (CAFE) standards during 2017-2025. The Obama administration released its proposed rule covering those years in mid-November, and three hearings are scheduled around the country for the month of January. Major auto manufacturers, labor unions and environmental groups already signaled their support back in July for the general concepts back in July; so the proposed rule is likely to become final with only some changes made around the edges.
      But even a fifth-grader can understand how the aftermarket will change as a result of these standards, once they go into effect. It goes without saying that CAFE standards affect vehicle manufacturers first and foremost. The only mention of the "aftermarket" in the mammoth, eye-splitting, 700-plus page proposed rule issued in November is with regard to aftermarket conversion companies, some of whom will apply for and be granted what are called small entity and/or small business exemptions. But the aftermarket will be affected indirectly and undoubtedly heavily by the development of technologies by manufacturer suppliers, who will distribute those technologies, be they low-friction lubricants, low-resistance rolling tires, air conditioning refrigerants with a lower global warming potential (GWP), to aftermarket retailers soon after they deliver them to the OEMs.
     Of course, there are, for example, low-resistance rolling tires already available in the aftermarket. But this Phase II CAFE proposal (Phase I will cover 2012-2016, and its rule is already final) will birth, for example, a second generation of low-resistance rolling tires with a 20 percent improvement in fuel economy and GHG emission reduction over those expected to be sold in Phase I.
     Another aftermarket product line likely to see innovation is high-efficiency exterior auto lighting. It will be in the spotlight because OEMs will use new lighting technology to reduce vehicle electric loads, which will earn them GHG "credits" which lower the CAFE number they would otherwise have to meet. The EPA would extend credits for lighting that reduces the total electrical demand of the exterior lighting system by a minimum of 60 watts when compared to conventional lighting systems. To be eligible for this credit the high efficiency lighting must be installed in the following components: parking/position, front and rear turn signals, front and rear side markers, stop/brake lights (including the center-mounted location), taillights, backup/reverse lights, and license plate lighting.
      The Obama administration proposal envisions a CAFE average per fleet in 2025 of 54.5 miles per gallon, an increase from the 35.5 mpg average expected in 2016, the last year of the Obama administration's Phase 1 plan. The Obama administration's 2017-2025 proposal is based on assumptions that plug-in electric and electric vehicles will become staples of the roads over the next decade and a half. Setting aside for a moment the high cost of electric batteries and the potential consumer resistance to the technology because of its cost, EVs also suffer from recent reports of battery blow-ups and fires in the weeks following collisions.
     Despite support from a number of groups, not everyone thinks the Obama proposal is hunky dory. Jeff Breneman, Executive Director of the U.S. Coalition for Advanced Diesel Cars, says the proposal favors hybrid technology in some instances over advanced diesel internal combustion technology, whose mpg/GHG performance is about equal. Moreover, he points out, advanced diesel engines can go 300,000 miles easy, meaning the autos in which they are installed can be kept longer, sending their owners more frequently to aftermarket retailers.