This is the backdrop for Ford Motor Co.’s announcement last month that it’s pretty much getting out of the sedan business. It’s also a source of concern for those (like me) who worry about oil consumption, carbon emissions, the balance of payments and the like. Cars and light trucks have both been getting more fuel-efficient, but since 2014 the shift from cars to light trucks has halted overall gains in new-vehicle gas mileage.
Six years ago, former Environmental Protection Agency administrator William Reilly depicted the U.S. as “cruising toward 43.5 mpg.” Now we appear to be idling below 25.5 miles per gallon. So it was interesting to see the U.S. Energy Information Administration making the case last week that all is not lost (or gained, for those in the oil industry):
The increase in the sales share of light trucks—a category that includes pickups, minivans, sport-utility vehicles (SUVs), and all other light-duty vehicles that are not classified as passenger cars—in total light-duty vehicle sales, is sometimes cited as a cause of recent growth in fuel consumption. More important for long-term gasoline consumption, however, are the scheduled increases for fuel economy standards covering model years through 2025 and the increasing market role of vehicles that blur the distinction between cars and light trucks.
These compact “crossover” SUVs, such as the Toyota RAV4, Nissan Rogue, Honda CR-V and Ford Escape, get fuel mileage not much different from that of midsize cars, such as the Honda Accord and Toyota Camry, and have made big sales gains in recent years, all of which are credited in standard auto sales numbers to “light trucks.” The EIA report pointed to an EPA data series that counts many crossovers as cars. By this reckoning, light trucks’ market share has actually declined slightly since the early 2000s.
The EPA data covers “vehicles produced for the U.S. fleet.” Over time, this should more or less equal sales, but it’s also possible that it’s missing some of the recent gains in light truck sales, especially since it covers model years, which are generally supposed to begin in the fourth quarter of the previous calendar year but can go as early as the previous January. With that caveat, here’s a more detailed look from the EPA at the changing makeup of the U.S. motor vehicle market since 1975:
This shows a long car decline that has slowed since the early 2000s; a rise and fall of minivans; a modest decline for pickups; and gains for SUVs both big and small, with the latter making the steadiest advances over the past decade. As previously mentioned, these small SUVs aren’t gas guzzlers, so maybe we aren’t doomed to rising fuel consumption and greenhouse gas emissions. Indeed, gasoline consumption did fall a little in the U.S. last year, according to the EIA, and is now only slightly higher than it was a decade ago:
Still, there’s that pesky statistic about the average fuel mileage of new vehicles not rising since 2014. Yes, overall fuel economy can improve even as average new-vehicle mileage stalls, because the new vehicles still get better mileage than the old ones they’re replacing. Vehicle miles traveled is another key factor in fuel use, and it’s been through such downs and ups over the past decade that it’s a little hard to tell where it’s headed. But in general, things aren’t looking as good as they were four or five years ago for those hoping to keep fuel use and emissions down.
So here’s my slightly-reassuring-if-not-exactly-groundbreaking explanation: There’s a cyclical component at work here as well as a secular one. The cyclical story is that low gas prices and a healthy economy lead auto buyers to pay less attention to fuel costs and make them more likely to buy larger vehicles, which these days are mostly SUVs or pickups. The compilers of the average fuel mileage data, Michael Sivak and Brandon Schoettle — then of the University of Michigan Transportation Research Institute, since both moved on to other endeavors — tested this out last year against sales data from 2007 through 2016 and found that:
All of the effects were in the expected directions: higher disposable income was associated with lower percentages of car sales, while both higher gas prices and higher unemployment rates were associated with higher percentages of car sales.
At the same time, there’s clearly been a long-term shift away from traditional sedans and station wagons to vehicles of other shapes — mainly SUVs, although there’s also an ever-changing array of smaller cars, from Beetles to Scions to Minis to Fiat 500s to whatever strange-looking thing may come along next. This shift doesn’t necessarily portend declines in fuel mileage, and I would guess that the fuel mileage trend arrow is still pointed upward on a cyclically adjusted basis. But it does complicate things, and it accentuates the need for smart government policy on fuel economy.
Which brings us to those “scheduled increases for fuel economy standards covering model years through 2025” that the EIA mentions while failing to note that they have recently been rendered a lot less certain by the Donald Trump administration. Corporate average fuel economy standards are imperfect tools, with taxes on gasoline or carbon generally seen as a more economically efficient — if not exactly politically popular — way to reduce fuel use and emissions. Maybe, given the sharp changes in vehicle buyers’ preferences since 2014, it makes sense to reexamine some of the current rules. But actual backsliding on fuel mileage would be a tragedy, and seemingly unnecessary as long as Americans are satisfied with driving around in SUVs that are actually cars.
©2018 Bloomberg L.P.