As the first Toyota Priuses took to U.S. roads more than a decade ago and celebrities such as Leonardo DiCaprio and Cameron Diaz touted their virtues, enthusiasts predicted that hybrid cars would quickly become mainstream.
But there was a problem: They cost too much, and consumers spurned them. Last year, the vehicles represented less than 3 percent of cars and light trucks sold in the United States.
Now the Obama administration is deciding how much to push U.S. drivers into fuel-efficient cars.
Over the next few months, regulators are scheduled to set the next round of U.S. fuel economy standards for manufacturers. Among the proposals under consideration is one that would lift average fuel economy under the law to as much as 62 mpg by 2025.
The preeminent issue in the debate is how much the price of cars — gas, hybrids, plug-ins or whatever inventors come up with— would rise if regulations dictate such standards.
On one side are automakers, which warn that the highest targets could add as much as $10,000 to the price of a new car, devastating a U.S. industry that just two years ago was bailed out by the government.
Sales could plummet by 25 percent, they say, and 220,000 auto manufacturing jobs could be lost.
Regulators “need to ensure that their standards do not result in vehicles that consumers cannot afford,” the Alliance of Automobile Manufacturers, a trade group, warned in a letter this week to officials.
On the other side are environmentalists, who dismiss the automakers’ cost estimates as bloated and argue that the costs of investing in fuel efficiency are tiny compared with the effects of global warming and dependence on foreign oil. The proposal to raise the standard to 62 mpg, which would translate into “real world” average efficiency of about 45 mpg, is also backed by 17 U.S. senators, who last month issued a letter of support for a “maximum feasible” standard.
“The cost of investing in clean car technology will be vastly outweighed by the billions saved averting the dangers of global warming,” said Roland Hwang, transportation director for the Natural Resources Defense Council.
Environmental groups argue that the additional costs can be minimized with innovation. The added cost of purchasing a hybrid has been estimated to be between $3,000 and $5,000. But the groups point to a breakthrough in new hybrid systems that arrived in U.S. markets this year, which some industry experts said cuts costs of Prius-like hybrid systems by as much as a third.
This technology “is the biggest piece of the solution for hybrids,” said John German, a senior fellow at the International Council on Clean Transportation and the author of a book on hybrid cars. “It’s a quantum leap in cost reduction.”
The so-called “P2” systems have been installed this year in the Volkswagen Touareg, Infiniti M35 and Hyundai Sonata hybrids and are expected to become widespread if they prove successful.
Unlike the hybrid system in the Prius, which has two motors and two inverters for converting from DC battery power to AC motor power, the new Touareg has one motor and one inverter, which saves money. The Touareg hybrid improves fuel efficiency by 20 percent or more.
“We think it’s a better mousetrap,” said Joe Slenzak, director of business development for powertrain electrification at Bosch North America, which provides the P2 system for the Touareg. “We expect other automakers to expand use of this technology in the future.”
Other automakers are more skeptical about the potential for price savings from P2 systems, however.
“The idea that the P2 is a clear winner is not true,” said Larry Nitz, General Motors’s director of hybrid powertrain engineering. “I’m not sure it’s there yet.”
Under current rules, which run through 2016, average fuel economy is supposed to rise to about 35 mpg.
But the administration is wrestling with what to do from 2017 to 2025. Regulators have analyzed scenarios in which, under the law, fuel economy would rise to 47 mpg-62 mpg. At 47 mpg, the average car’s greenhouse gas emissions would drop by 3 percent annually. At 62 mpg, such emissions would be cut by 6 percent a year.
The two sides offer drastically different estimates of how much a change in fuel efficiency rules would add to the price of vehicles.
The Center for Automotive Research, a nonprofit organization in Michigan that relies, in part, on money from government agencies and the auto industry, estimates that getting to about 62 mpg would add $9,790 to the price of an average vehicle.
The Environmental Protection Agency, meanwhile, has estimated that the additional costs would be between $2,800 and $3,500, but the savings in fuel would be more than $5,000.
Aside from higher prices, fuel efficiency targets might make cars smaller, lighter and less powerful. The question hanging over the industry is whether consumers will embrace them.
Gloria Bergquist, vice president of communications at the Alliance of Automobile Manufacturers said there are many cars that offer very good mileage — 160 models that get more than 30 mpg, by her count.
“Our technology is in the dealer lots,” she said. But people aren’t buying them in large numbers. “We still need to have pickup trucks.”
Furthermore, a Consumer Reports survey found that while most people support a national goal of reducing oil consumption, 94 percent named a high purchase price as a deterrent to choosing an “environmentally friendly or green” vehicle.
Another study, conducted at MIT, suggested that even while fuel-efficient cars might save consumers money in the long run, they are reluctant to pay for fuel efficient technology up front.
“If you tell people that we can make these vehicles so much more efficient that they won’t need to compromise on their vehicle, in my view that’s a lie,” said John Heywood, a professor who specializes in engines at MIT. “If you go for 62 mpg, as we move toward 2025, people will be disappointed by how much change in the vehicles they love is involved in that number.”