Getting to 54 MPG Will Change What We Drive

By Phil LeBeau, CNBC Correspondent

NEW YORK (CNBC) -- Now that the Department of Transportation and the EPA have locked in the new fuel efficiency rules guiding the industry through 2025, the focus shifts to how automakers meet the CAFE standard of 54.5 MPG 13 years from now.

The fact is, they're not sure. At an event outside Detroit on Tuesday Chrysler CEO Sergio Marchionne told the Detroit Free Press, "Everything is on the table. We are struggling with some big choices we need to make."

Here's what the automakers are facing when it comes to fuel economy rules:

Currently: 27.5 MPG

2016:34.1 MPG

2025:54.5 MPG

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So how will automakers get there? Truth is, they won't have to make sure every car and truck they build in 2025 gets at least 54 MPG. In reality, most won't have to and once calculated with the new fleet fuel economy rules the average fuel economy will be closer to 40 MPG.

Still, changes will have to take place:

Hello 4 cylinders, goodbye V8:

This transition is already taking place as automakers build more fuel efficient models. By 2025 we will see even fewer cars with 8 cylinder engines.



Turbo Charger Technology advances:

Turbo chargers give smaller engines and better performance while using less fuel. This is just the start of what we'll see in more vehicles over the next 13 years.

More aluminum, less steel:

The challenge for automakers now revolves around building lighter vehicles. That means adding more aluminum and taking out heavier steel. The issue is how they will continue doing that while meeting crash safety standards.

More gas-electric hybrids:

As the Toyota (TM) Prius is showing yet again (up 92.5% YTD), people will buy hybrids. In fact, it's hybrids, not pure electric cars, that will likely be the big focus of automakers developing alternative powered vehicles.

I've heard from a lot of people in Detroit who say there is no way automakers can meet the new guidelines. That is one reason the new guidelines will be reviewed in 2017.

By then, automakers may come back to lawmakers and make it clear 54.5 MPG is a target that is too high and would require building small lightweight cars people don't want. But for now, 54.5 MPG is the goal.



--Written by Phil LeBeau for CNBC

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