An uphill fight to improve nation’s fuel economy

As the U.S. auto industry prepares to enter a new year, one of its main regulators has released a wrap-up of the industry’s massive efforts from a full year ago to improve new-vehicle fuel economy.

How did the industry do? Well, not good, at least as far as the EPA goes. The agency found that new-vehicle fleet fuel efficiency was flat in the 2021 model year, stuck at a real-world average of 25.4 mpg for the second consecutive year.

The EPA’s annual fuel economy report comes as the year is ending, so it doesn’t always seem relevant to current conditions. But the report, which found that the Detroit 3 again lagged foreign automakers, should come with a bouquet of asterisks.

Progress on raising fuel economy is being made every day by almost all automakers selling vehicles in the U.S., not least by the growing number of new electric vehicles. Yet improvement in the annual measurement looks to have been hampered by supply constraints as well as U.S. consumers’ continued preference for larger, less fuel-efficient SUVs, crossovers and pickups.

The EPA also put out an initial estimate of the 2022 fleetwide average, predicting an increase of 1 mpg to 26.4 mpg. The final 2022 figure won’t be reported until late next year, and it will benefit from the growing share of hybrids, plug-in hybrids and EVs.

Consumers clearly benefit from improved efficiency for any type of vehicle or powertrain — the question is what they are willing to pay for it. For automakers, each incremental gain in efficiency squeezed out through improved aerodynamics, advanced powertrain engineering and weight savings can represent added costs that must either be absorbed or passed on to the consumer. Weighing those incremental gains and their potential return on investment against the gains mandated by regulations is enough to exhaust any executive.

Consumer preferences for larger vehicles already work at cross-purposes to fleetwide gains in fuel economy. Automakers have no desire to stop selling their most popular and profitable offerings, especially when they see the thin — and sometimes nonexistent — margins generated by smaller cars and those powered by expensive battery packs.

Until consumers and regulators are able to strike a balance between desire and practicality, average fleetwide fuel economy is unlikely to make any major leaps. And that is a disappointment for the industry as a whole.