Hyundai’s Krafcik: Segmentation Shifts Necessary to Achieve 62 MPG
More consumers will need to be convinced to move down in vehicle size if the government’s most aggressive fuel-economy target is to work, says the auto maker’s top U.S. executive.
LA JOLLA, CA – In his usual bold fashion, Hyundai Motor America President and CEO John Krafcik turned heads in August when he promised Hyundai would achieve a fleet average 50 mpg (4.7 L/100 km) in the U.S. by 2025.
But even he has his doubts about the U.S. government’s recent proposal to raise auto makers’ fleet average to 62 mpg (3.8 L/100 km) by 2025.
That target, a maximum under consideration by the Environmental Protection Agency and National Highway Traffic Safety Admin., will require significant investment on the part of auto makers and the government to drive unprecedented changes in consumer behavior, Krafcik tells Ward’s here at a media backgrounder for the new Sonata Hybrid.
“One of the things we need to figure out, if we want to do this or not as a society, is do we want to encourage more people overtly to change vehicle segments for their next vehicle?” Krafcik asks. “Do we want to give people a reason to go from a midsize car to a compact car?”
If they do move down one size, they won’t have to give up a lot in functionality, he says. “But the fuel-economy benefit of those segmentation switches is pretty significant.”
Average fuel economy for vehicles in the Ward’s Lower Middle segment, where Hyundai’s midsize Sonata model resides, is 24.4 mpg (9.6 L/100 km). The Upper Small segment, home to the current Hyundai Elantra compact, averages 27.2 mpg (8.6 L/100 km).
Getting consumers to step down one segment is a requirement – “no question” – if auto makers are going to hit fleet averages in the 50-62-mpg range, Krafcik says.
Hyundai’s Elantra compact car.
But to steer U.S. buyers in the right direction, the current attribute-based corporate average fuel economy system will need to be changed, he says.
The continuation of an attribute-based scheme, which allows manufacturers to keep larger gas-guzzling vehicles in their lineup so long as they balance them with smaller, more fuel-efficient cars, may inadvertently “give (auto makers) reasons to continue to make less-efficient segment allocation decisions,” Krafcik says. “It’s kind of enabling behavior.”
While the government’s most aggressive proposal targets a fleet average 62 mpg, each individual company would have to meet a slightly different number based on its sales mix and the physical makeup of its lineup.
For instance, the 2016 CAFE regulations call for the U.S. fleet to average 35.5 mpg (6.6 L/100 km). But because of its current model mix, American Honda Motor Co. Inc. says it will need to average 37.4 mpg (6.3 L/100 km) for its Honda and Acura brands combined.
Many auto makers, including the Japanese, currently selling some of the most fuel-efficient vehicles in the U.S., have indicated they plan to keep larger SUVs and pickups in their 2016 lineups.
Hyundai can achieve its internal 50-mpg 2025 fleet fuel-economy target via optimization of its internal-combustion engines, Krafcik says.
But to meet a 62-mpg fleet average “would definitely require more than just smart engineering, ” he says, adding most vehicles sold in the U.S. would need to be hybridized or electrified.
“(And) it would require significant investments in infrastructure, a significant amount of government leadership in investments in alternative fuels and perhaps (a) carbon tax to move people in the direction of vehicles that are going to exceed 62 mpg.”
The EPA and NHTSA estimate a 62-mpg standard would cost auto makers about $3,500 per vehicle, save 1.3 billion barrels of fuel and trim greenhouse-gas emissions up to 650 million tons (590 million t) between 2017 and 2025.
A final ruling for 2025 CAFE isn’t expected before 2012.
– with James Amend
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