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Analysts: Fuel Economy Rules Aren’t Why Cars Are More Expensive

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The EPA and lobbyists for the auto manufacturers have been, to put it mildly, disagreeing about the EPA’s increasing fuel economy regulations. The automaker lobbyists have been pushing hard for regulations to be delayed or relaxed, citing one particular study which said that they couldn’t possibly meet the current levels due to high demand for SUVs.

That isn’t the only argument against current regulations—one in particular from the head of the Alliance of Automobile Manufacturers, Mitch Bainwol, was that emissions regulations would only drive up the price of new vehicles, as automakers are forced to use efficiency-boosting technology.

This argument does point to a trend, since new car prices have been on the rise, hitting an average high of $34,077, up 2.6% over last year.

However, analysts Alan Baum, who is Principal of automotive forecasting and research consulting group Baum & Associates, and Dan Luria, who is an independent industry analyst, disagree with Bainwol, saying that fuel economy rules aren’t to blame for rising prices—more SUVs and the increasing expectations of high-income buyers are.

Income inequality, the two argue, is an overlooked factor as average vehicle price has gradually moved new vehicles out of the reach of low- and middle-income families, while wealthier customers have been demanding more luxury and a greater array of standard features, while automakers have in turn added more top-end trim levels, which tend to be more profitable.

The NHTSA and EPA have estimated the added price to meet the CAFE fuel economy standards from 2012 to 2025 was a little under $3,000 per car.

News Sources: Green Car Reports, The Hill