U.S. Car Dealers Still Pushing for Second Look at 2025 CAFE Rules

DETROIT – The National Automobile Dealers Assn. continues to oppose 2025 U.S. corporate average fuel economy rules of 54.5 mpg (4.3 L/100 km), hoping newly introduced legislation will take a second look at the regulations in 2017.

“It’s going to be very hard for the manufacturers to build the cars the public wants to get 54.5 mpg,” Chairman Bill Underinner tells WardsAuto after addressing the Automotive Press Assn. here.

“The other problem is the cars are going to cost more,” he adds.

Most auto makers selling in the U.S. have backed the 2025 rules, although meeting them will require billions of dollars in product investment and raise vehicle prices. Current cars with advanced fuel-saving technologies are selling poorly.

Underinner believes the Environmental Protection Agency, which together with the National Highway Traffic Safety Admin. crafted the rules, is underestimating the extra cost required for cars and trucks to hit 54.5 mpg.

“It will create a jalopy effect, where people hold onto their cars longer because they don’t like what’s being sold,” he says.

Customers in rural areas, such as Billings, MT, where Underinner’s dealership is located, will reject the idea of spending more up front for a vehicle, even if the extra outlay is recouped years later in fuel-cost savings, as backers of the rules suggest. Bankers will not lend the extra money, either, he says.

“It’s going to be pretty tough in Montana.”

Underinner says NADA supports new legislation introduced last month by Congressman Mike Kelly (R-PA) asking lawmakers to provide more economic and safety analysis, as well as examine in 2017 the effect of current CAFE increases to 35.5 mpg (6.6 L/100 km) on the industry.

Underinner also says NADA continues to investigate the efficacy of recent OEM-mandated renovations at dealerships, while criticizing auto makers’ “stair step” sales incentives.

The dealer group will determine by early next year the value of such OE-driven showroom-upgrade programs.

Underinner is no fan of the idea, saying the return on investment for retailers so far has been disappointing. Not all dealers can afford the upgrades, some customers may take exception to them and the cookie-cutter look they create does not play well in all regions of the country.

“People don’t care,” he says. “They just want a clean dealership and good service.”

In Montana, local ranchers and farmers might think they are paying too much for their vehicles if a dealer can afford the multi-million upgrades OEMs are pushing.

“All of a sudden, (the dealer) puts up a $2 million-$3 million building, these farmers and ranchers are shaking their heads a bit. That’s a problem there,” Underinner says.

A 28-year veteran of selling cars and trucks and 10 months into his 1-year appointment as NADA chairman, Underinner also objects to the use of 2-tier, or “stair-step,” wholesale incentives by OEMs. The programs base incentive allocation on sales volumes and he says they hurt dealer profitability and often play stores in the same area against each other.

“Stair-step programs are really about manufacturer market share,.

Underinner says auto makers and dealers must get on the same page over renovations and pricing.

“OEM top-down control never works. We need to get back to the basics. In spite of all the new technology, cars are still sold one at time, face-to-face.”

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