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Report: Automakers Embracing Fuel Efficiency

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July 27, 2012 by   Leave a Comment

The first half of 2012 set the record for the highest-ever fuel efficiency for new passenger vehicles entering the U.S. market, according to industry analysts Baum & Associates.

In a press release the company stated that the country reached this record mile per gallon level without relying on higher small car sales – a significant shift from a pattern going back to the 1973 Arab oil embargo where similar gains were achieved only when consumers moved to smaller vehicles in the face of higher gas prices.

From January to June of 2012, the average fuel efficiency of new passenger vehicles was 23.8 mpg, improving by 1.1 mpg the record of 22.7 mpg set over the same six months in 2011. Baum & Associates calculated the average fuel efficiency using monthly fuel economy data from the University of Michigan and sales data from Wards Automotive.

Importantly, the projected new auto sales figure for 2012 is 14.2 million units, up a strong 1.5 million vehicles over 2011.

“Thanks to a bumper crop of fuel efficient models in the most popular segments, consumers don’t have to choose between fuel efficiency and performance,” said Alan Baum, principal of Baum & Associates. “No matter what type of vehicle you want, midsize car, minivan, SUV or pickup truck, carmakers are now upping fuel efficiency performance across the board. The new era of auto fuel efficiency is truly here.”

Baum pointed to three key factors accounting for these trends that fly in the face of past experience during periods of high gas prices:

• There are now significantly more fuel-efficient vehicle choices of all sizes for consumers. The number of high fuel efficiency, high volume vehicle models has more than doubled since 2009 from 28 to 60, according to analysis by Baum & Associates. These include fuel-efficient models of small cars, midsize cars, and crossovers (CUVs). A May 2012 Consumer Reports survey showed that fuel efficiency is by far the #1 concern for prospective auto buyers.

• Consumers are buying larger fuel-efficient vehicles, not just small high-MPG cars. In an important shift, the 2012 year-to-date increase in the market share of small cars and crossovers over the same period in 2011 is just 0.4 percentage points. (By contrast, sales of small cars and crossovers jumped by a much larger 4.8 percentage points during the previous period of high gas price from 2007 to 2009.) The important shift here is that consumers are embracing larger fuel-efficient vehicles.

• A “perfect storm” of factors coincided with industry roll-out of vehicles under new federal higher MPG standards. Model year 2012 is the first year of a long-term federal program that requires an average laboratory rating of 35.5 mpg by 2016, equivalent to a label average of about 27.3 mpg. Final rules expected next month will raise the standards even further to an average laboratory rating of 54.5 mpg by 2025. In 2012, the increased availability of more fuel-efficient models to meet these standards coincided with high spring gas prices, creating a perfect storm of an ample fuel-efficient car supply in every segment just in time to meet surging consumer demand.

“Simply put, the fuel efficiency standards are working and in fact, are exceeding our expectations,” said Luke Tonachel, vehicles analyst at the Natural Resources Defense Council (NRDC). “These standards are doing exactly what they are supposed to do: delivering the fuel-efficient cars that consumers clearly want. We look forward to the continued improvements and more fuel-efficient choices that the 54.5 mpg standards will bring.”

Based on the year-to-date sales data from model year 2012 (October 2011 to June 2012) as tracked by the University of Michigan, the U.S. fleet fuel efficiency average is poised to exceed government regulators’ predictions of a fleet wide average of 23.4 mpg for model year 2012.

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