Revamp the Corporate Average Fuel Economy (CAFE) standard — don't freeze it, says Jim Press, Alliance of Automobile Manufacturers chairman and Toyota North America chief operating officer.

Mr. Press says the AAM may try to strike a deal with the Bush administration and Congress to replace CAFE with tax incentives and other methods to improve fuel economy and emissions. “The alliance has taken the position this year that we do not support a freeze of CAFE.”

A study into possible revisions is under way. Key to AAM's proposal is to make fuel economy and emission improvements financially feasible to consumers in high-volume product segments. Current hybrids and electric cars are too expensive and/or impractical for many. “We're talking about implementing a series of tax incentives where instead of pushing technology on customers, we make it advantageous and motivate the customers to adopt new technologies, to adopt higher gas mileage, to adopt cleaner vehicles,” Mr. Press says.

“The new adminstration has been open for dialogue,” he says, adding it also seems interested in promoting advanced technology and fuel cell research as long-term solutions.

It doesn't make sense to leave CAFE the way it is, because it is only half the solution, says Mr. Press. It pushes vehicle development but provides no incentive to customers to buy them. He points to the Toyota Prius hybrid car, which he says would be easier to buy if a tax incentive addressed the cost differential, and strong sales would “ignite other vehicles like it.” CAFE also “dictates what kind of cars you can sell. Isn't it better to sell large trucks that get better gas mileage then to push people into small cars?”