During a hearing last week, EPA Administrator Gina McCarthy claimed that the Obama administration’s fuel efficiency standards [a.k.a. “CAFE standards”] are evidently successful, because “you can’t a see a car commercial where they don’t talk about energy efficiency, because the car companies now know that everyone wants fuel efficient vehicles.”
At the time, I disputed her contention that “everyone wants fuel efficient vehicles,” with regard to American consumers. In fact, the recent drop in gas prices precipitated a big increase in the purchase of fuel inefficient cars and trucks in the U.S. The consumer rush to gas guzzlers in America was such that President Obama found it necessary to admonish his constituents for doing so.
Administrator McCarthy’s claim was further belied by a report in yesterday’s Financial Times ($), “Off Roaders Reach New Peaks as Market Shifts,” by Andy Sharman. According to Mr. Sharman, it’s not just ugly Americans flocking to SUVs, because the same holds true for supposedly super-climate-conscientious western Europeans:
Today, I draw your attention to a report in yesterday’s Financial Times
What do Jaguar, Bently, and Rolls-Royce have in common?
They are British mawques, they are owned by foreign companies, and they are piling into the must-have car of the 21st Century: the sport utility vehicle.
As the great and good of the car industry assemble in Geneva today for the annual motor show, the predominance of these bulky cars with off-road pretensions will be apparent
The rise of the SUV reflects a shift in consumer tastes towards vehicles with rugged looks and a large presence on the road, as well as a perceived increased capability, utility, and safety…
But the consumer shift to SUVs marks a challenge as well as an opportunity for carmakers. In a Catch-22, these hulking vehicles bring in the profits needed to fund investment into more fuel efficient vehicles, but make it harder to meet stringent carbon dioxide emissions targets set by Brussels…
“Cutting CO2 is clearly difficult when your customers want to drive bigger, heavier cars,” Stuart Pearson, analyst at Exane, writes in a report.
So Administrator McCarthy is plainly wrong: Everyone does not want fuel efficient vehicles. Rather, *everyone* seems to want a gas-guzzling SUV. Volvo CEO Hakan Samuelsson said it best when he told the FT that, “The trick is to have an attractive car, because people will be prepared to pay more for that. And right now the market considers the SUV an attractive car.”
From a theoretical perspective, she is also clearly wrong in her apparent assertion that government mandates dictate consumer preference.