The government’s efforts to impose efficiency standards on the auto market will probably mean a big economic hit as rising prices for cars drive buyers out of the market:
If the National Highway Traffic Safety Administration makes its proposed 2025 fuel economy standards official, cars are going to be more expensive, and that’s going to shut millions of buyers out, argues the National Automobile Dealers Association. “If the price of a vehicle goes up by the government estimate of almost $3,000,” says David Wagner, an analyst for the NADA Used Car Guide, “millions of people will no longer be able to finance a new vehicle.” The proposed standard is aiming for an average of 54.5 mpg for both cars and trucks by 2025, and is predicted to add $2,000 to the cost of a vehicle. Add to that the $1,000 or so that’s going to be added to the price of vehicles as the current fuel economy requirements phase-in between now and 2016, and the $30,000 average price of a new car rises to the point where lower income buyers may not be able to qualify for financing.
Hybrid and electric cars, heavily subsidized and promoted by the government, are already a bad deal for consumers requiring decades of ownership or fuel prices that are double to triple what they are now to make them economically sensible.
This, perhaps, is why most hybrid owners aren’t repeat customers.
What the government proposes doing by imposing these efficiency standards on all vehicles is create a lot more bad deals for consumers.
But why does the government need to mandate efficiency? Most of us would love to buy a car that gets 54mpg, assuming it meets our other standards in terms of safety, performance, cost, etc. Nobody likes paying more for gasoline than they would have to otherwise.
When 54mpg makes economic sense, the market will embrace it. There’s no need for the government to ram it down our throats.