Yesterday Honda Motor Company conducted a webinar entitled The Fuel Economy Challenge addressing the new CAFE standards and Honda’s overall approach to alternative fuel vehicles. Present at the webinar were John German, Manager, Environmental Policy Analysis America Honda Motor; Ben Knight, VP Honda R&D Americas; Edward Cohen, VP Government Relations American Honda Motor; and Dan Bonawitz, VP, Product Planning and Corporate Logistics America Honda Motor.
The goals of the 90 minute presentation and Q & A, which is available online, was to provide a clear understanding of Corporate Average Fuel Economy Standards (CAFE), and to explain Honda’s approach to advancing fuel efficiency.
I recommend taking the time to watch the full webinar for anyone interested in the new CAFE standards and the outlook of the auto industry from the perspective of a major automaker.
Below I summarize some of the main points from John German’s presentation about the new CAFE standards. In the webinar, Ben Knight discusses Honda’s approach to meeting the goals of the new CAFE and the company’s overall approach in alternative fuel vehicle development:
- The auto industry is at a critical juncture, facing the twin challenges of energy sustainability and climate change.
- Determining CAFE standards and measuring results, while widely discussed, is also easily misunderstood due to their complexity. (If you watch the webinar, have your scientific calculator on hand so you can do the math along with German).
- The new CAFE standards are a “game changer” for automakers, involving both attribute-based standards and “maximum feasible” standards. The 35 MPG target is the minimum mandated by Congress, and will likely be higher due to the maximum feasible requirement.
- The new standards will not only increase fuel efficiency, but also determine the future direction of policy development as well as the nation’s long term policy toward sustainability and climate change.
- The new CAFE standards will triple the rate of new technology introduced for improving fuel efficiency. Between 2011 and 2015, miles-per-gallon is required to increase at a rate of 4.5% per year. Therefore, the actual average MPG rating by 2020 may actually be higher than the required 35 MPG minimum. (See graph below)
- Only 20–25% of the power produced in a modern internal combustion engine is available for motive force. Even a hybrid is only 30–35% efficient. Therefore significant opportunities still exist to improve the efficiency of the internal combustion engine. (See graph below)
- The internal combustion engine will continue to dominate the market through at least 2020.
The new CAFE – more points:
- Vehicle cost will likely increase due to higher efficiency standards. The National Highway Traffic Administration (NHTSA) estimate a 56–month ownership to recover the cost of 2015 model year vehicle through increased efficiency.
- Over the last 20 years, most improvements in technology have gone to attributes such as safety, utility, luxury, or performance. The new CAFE standards mandate the almost all technology improvements go toward fuel economy.
- Challenges for automakers in complying with CAFE standards include:
- short lead times,
- new technology costs that may be higher than the typical customer’s perceived value given the overall mandate of the standards to incorporate societal considerations in technology improvements.
- There is currently a significant shortage of engineers to keep pace with the rapid research and deployment of the required technology improvements.