Gas Mileage: Which car manufacturer was fined over $260 million?

 In Inside FleetCarma

Since the late 70s we’ve had mandated fuel economy standards in North America.  In America, these are called the Corporate Average Fuel Economy (CAFE) standards and they are intended to bring better gas mileage (higher mpg) vehicles to market.

CAFE Fines Top 5 1978 to 2008

Who tops the list?

Originally CAFE was a response to the crisis caused by the 1973 Oil Embargo. Some readers may remember the odd-even gas rationing system during the crisis. The original motivation was purely energy independence.  Over the years, the motivation for better gas mileage has grown to include economic, environmental, and geo-political ingredients.  More bluntly, higher gas mileage:

  • keeps more dollars in your pocket,
  • puts less emissions into the air,
  • and sends less dollars overseas.

A few car manufacturers continually miss the standard.  Here we list the top 5 car manufacturers that have been missing the standard, and how much it cost them.

Big changes to CAFE started to take effect last year, and these changes will result in vehicles achieving much higher mpg ratings in the upcoming years. A simplified curve of the 2012-2016 standards and proposed 2017-2025 standards are shown. I’ll talk about what these changes mean for the average North American in another post. For now, lets take a quick look at who’s not made the old standards.

CAFE MPG Standards 1978 to 2025

Fuel Economy Standards from 1978 to 2025

What happens when a car manufacturer doesn’t meet the mpg standard?

They get fined.  I’ll cover the way the fine is calculated in detail another time. The short answer is that the fine rate is $55 for each mpg that is missed multiplied by each vehicle sold.

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The fine information is publically available – kind of.  The agency that regulates CAFE has a summary of fines here.  You notice though that the data only goes to 2004.  Doing some more digging I was able to harvest the data up to 2008.

Crunching the numbers and summing over the years, I come up with the following totals.

Gas Mileage: Top 5 most-fined car manufacturers

5. DaimlerChrysler at $55 million.

I’ve always loved the Jeep YJ’s iconic look.  Unfortunately it was as close to an aerodynamic brick as you can get.

4. Volvo at $56 million.

Volvo means “I roll” in Latin.  They didn’t say how easily they roll.

3. Porsche at $62 million.

In a way, this is impressive.  Since the fine is based on the total vehicles sold this lower volume car manufacturer must have missed the mpg marks by quite a bit.

2. BMW at $231 million.

The “Ultimate Driving Machine” has not historically included good gas mileage.  With the focus on EfficientDynamics, it is clear that Ultimate Driving Machine of the future includes high efficiency.

And, taking the top spot:

1. Mercedes-Benz at $262 million.

And this doesn’t include the $30+ million fine in 2009 (again, my numbers only went up to 2008).  Similar to BMW, the car manufacturer is clearly increasing the importance on fuel economy.  With the roll out of the BlueTEC clean diesels and other technologies in the BlueEFFICIENCY portfolio, the German car manufacturer is greening (or blue-ing) its offering.

CAFE Fines Top 5 1978 to 2008

Car manufacturers with the most fuel economy fines

So what’s next

As you saw above, last year marked the start of the biggest increase in fuel economy standards in history. Since the fines are based on how far off the target a car manufacturer is, manufacturers that don’t increase the mpg ratings of their cars and trucks will be getting larger and larger fines. So you can expect to see higher fuel economy cars hitting the show rooms – from all manufacturers. And that’s a good thing for the your wallet, and for energy independence.

Agree? Don’t Agree? I’d love to hear your comments. One barrel at a time, Matt.

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  • Erikw

    Well written article Matt. I think it’s important to note that all OEM’s try to build vehicles that consumers want to buy but are also very conscious of the role that their brand image plays. Hence the strategy that German manufacturers have historically followed of paying fines in order to sell fast & heavy high-end vehicles in the North American market. Back home, these manufacturers also sell smaller/lighter models and therefore have different brand images. If I were a gambling man, I’d say that the German OEM’s will continue to build the same types of cars for the North American market and continue to pass the cost of compliance on to their customers. After all, what is the marginal cost of CAFE fines on a 70k vehicle?

  • MattS

    Great point Erik.  
    Agree fully that they probably won’t try and fully comply, and for the reasons you mentioned.  
    Having said that, I do think they will be pressured to increase the fuel efficiency.  Reason being that they are competing with brands such as Lexus and Infiniti that are complying.  As the marginal cost of CAFE fines increase this will eat into their margins as they need to be cost competitive with brands that aren’t being fined.  

    How much is that marginal cost per vehicle? Great question, I think I have my next topic… 

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  • Although more efficient vehicles logically seems to be a good idea, studies show that for every 10% increase in fuel efficiency, people increase their driving by 2%. Bummer! 

    Need to educate Americans on science and climate change so that they pressure policy makers to invest in public transit alternatives and drive less.

    • MattS

      Stephen, you make a good point that increasing efficiency generally causes a bump in km/miles traveled. …I’ll still gladly take 10 steps forward even if it results in two steps back – 8 steps forward is way better than standing still!

  • Rhonda

    Well Done.

    • MattS

      Thanks Rhonda!

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