Better Fuel Economy, Higher Prices?

The cost of new technology needed to meet 2020 U.S. fuel-economy requirements could cause at least a momentary hiccup in new-vehicle demand, General Motors Corp. Vice Chairman Robert Lutz predicts.

The new rules, which call for the U.S. fleet to average 35 mpg), will add thousands to the price of each vehicle, Lutz says.

“Customers will have to take it (price increases), because we'll have to meet the law,” he says in an interview at the auto show here following participation in a public discussion about the Chevrolet Volt plug-in hybrid due on the market after 2009.

“Momentarily there could be a shrinkage of personal vehicle sales,” he adds. “It will cause a terrible sticker shock when the new technology starts to roll out.

“I'm not trying to scare people, but I'm trying to prepare them. Fuel economy doesn't come free.”

Lutz says 80% of the future fleet will require 8-speed transmissions, adding hundreds of dollars to the cost of cars. There will be increased use of 4-cyl. direct-injected gasoline engines that will run $1,100-$1,500 more than present engines.

Introduction of lithium-ion batteries required for hybrids will add costs in the low thousands of dollars, Lutz says. But GM's 2-mode hybrid system, currently offered on its fullsize SUVs, could tack on $10,000 or more to the cost of cars, he says, adding the system currently costs more than that. GM says it currently loses money on every 2-mode hybrid it sells.

Plug-in 2-mode hybrids would hike costs $18,000-$20,000, Lutz estimates, while he puts the tab for clean diesels in the low thousands.