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Asociación mexicana de la industria automotriz, a. c. 1 AMIA Proposal for New Vehicle Fuel Economy Standards Eduardo Solis – AMIA Jim Lyons – Sierra Research,

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Presentation on theme: "Asociación mexicana de la industria automotriz, a. c. 1 AMIA Proposal for New Vehicle Fuel Economy Standards Eduardo Solis – AMIA Jim Lyons – Sierra Research,"— Presentation transcript:

1 asociación mexicana de la industria automotriz, a. c. 1 AMIA Proposal for New Vehicle Fuel Economy Standards Eduardo Solis – AMIA Jim Lyons – Sierra Research, Inc. April 15, 2011

2 asociación mexicana de la industria automotriz, a. c. Role of Sierra Research Independent Consultant with Experience Related to Fuel Economy Standards Collected Confidential Data from AMIA Members Needed Assisted AMIA in Formulating Proposal 2

3 asociación mexicana de la industria automotriz, a. c. Presentation Outline Background Mexican Vehicle Fleet AMIA Principles AMIA Proposal Analysis of AMIA and Government Proposals Comments on Government Proposal 3

4 asociación mexicana de la industria automotriz, a. c. Contexto económico Efectos en eficiencia energética de una norma para autos nuevos vs una norma en autos usados –De acuerdo a un estudio del Químico Luis Manuel Guerra, una norma de eficiencia energética que aplique a autos nuevos solo tendría resultados equivalentes a una disminución del.3 por ciento en el consumo de combustibles en un año, por lo que para lograr objetivos sustantivos de eficiencia energética recomienda que se instrumenten normas que se apliquen a los autos usados que circulan en el país. –En los autos usados se encuentran las oportunidades de eficiencia energética. Se estima que alrededor del 75 por ciento del consumo de gasolina en México se lleva a cabo en los vehículos de más de 10 años de antigüedad 4

5 asociación mexicana de la industria automotriz, a. c. Contexto económico Efectos en eficiencia energética de una norma para autos nuevos vs una norma en autos usados –La aplicación de normas de emisiones (NOM-041) y de condiciones físico-mecánicas (anteproyecto NOM-031) en autos usados en todo el territorio nacional, que por cada millón de autos usados que se retiren del parque vehicular, esto traería una reducción en el consumo de combustibles de 4.4 por ciento, es decir en un solo año de aplicación de normas a usados en todo el territorio nacional se lograría lo que casi 5 años de aplicación de la NEE en nuevos. –La entrada de 426,000 autos usados de procedencia extranjera en 2010, tiene un impacto en el consumo de combustibles que equivale a 3 años de aplicación de la NEE. 5

6 asociación mexicana de la industria automotriz, a. c. Contexto económico Efecto sustitución de una norma demasiado estricta –El cumplimiento de una norma de eficiencia energética implica la introducción de tecnología que le permita al fabricante cumplir con los nuevos estándares (transmisión de 6 velocidades, CVT, start & stop, inyección directa, entre otras) –Esta adaptación de los vehículos implica un costo adicional para el fabricante con el consecuente impacto al precio de venta. –El incremento de precio tiene como consecuencia una caída en la demanda de vehículos nuevos, y por efecto sustitución, estos consumidores cambian su decisión de compra hacia un auto mas barato usado. 6

7 asociación mexicana de la industria automotriz, a. c. Contexto económico Se estima que el incremento en precio que podría resultar de una norma como la propuesta por el Gobierno Mexicano tendría un impacto en precio de alrededor de 50,000 pesos (Fuente: Sierra Research Inc.), impactando entre 20 y 25 por ciento el precio de los vehículos en promedio con la consecuente caída en la demanda. Utilizando un modelo econométrico de estimación de demanda mensual para la venta de autos nuevos del Banco de México, este incremento en el precio de los vehículos podría traducirse en una caída en ventas de autos nuevos, de alrededor de 48,000 vehículos, es decir 5.8 por ciento de las ventas del

8 asociación mexicana de la industria automotriz, a. c. Contexto económico Además del nocivo efecto en el mercado interno, los consumidores que no adquirieron vehículos nuevos se quedan con sus autos usados o adquieren un auto usado de un modelo mas reciente pero que no cumple con los objetivos de la norma. El efecto final es una disminución en el promedio alcanzado de eficiencia energética por la aplicación de la norma ya que será el promedio ponderado de el 94.2 por ciento de los nuevos vehículos más el 5.8 por ciento de los vehículos que se sustituyeron por vehículos usados. La propuesta de AMIA busca minimizar este efecto 8

9 asociación mexicana de la industria automotriz, a. c. Proposed Gvt. Energy Efficiency NOM Goal is to reduce GHG emissions from light-duty vehicles; Assumes little improvement in fuel economy to 2030 MY without standards; Target is to increase new vehicle fleet fuel economy from 11.8 km/l for 2008 MY, to 17.4 km/l for 2016 MY, and 20 km/l for 2020 MY; Assumes no decrease in sales of more expensive new vehicles and fast fleet turnover. 9

10 asociación mexicana de la industria automotriz, a. c. Mexico GHG Emissions Sources: (1) INE 10/2010; (2), (3) Centro Mario Molina 12/2005; (4) AMIA 2010 database, with assumed 20,000 km/year average.

11 asociación mexicana de la industria automotriz, a. c. Other Approaches for Reducing GHG From Light-Duty Vehicles Include: Restrict importation of old vehicles; Improve fuel Quality to allow Diesels; Impose carbon (fuel) tax or travel (miles) tax; Require renewable fuels; Provide financial incentives to encourage replacement of old vehicles with more efficient new vehicles. Public policies are needed in each item 11

12 asociación mexicana de la industria automotriz, a. c. Mexican Light-Duty Vehicle Fleet About 20 million vehicles in fleet in MY sales of new vehicles about 1 million units With another 0.7 million imported old vehicles in

13 asociación mexicana de la industria automotriz, a. c. New and Imported Vehicle Trends Source: AMIA, AGA 13

14 asociación mexicana de la industria automotriz, a. c. Fleet Age 14

15 asociación mexicana de la industria automotriz, a. c. Consequences In general, older vehicles have higher emissions of air pollutants and lower fuel economy than newer vehicles. Allowing importation of old vehicles reduces new vehicle sales and the benefits of new vehicle emission and fuel economy standards. 15

16 asociación mexicana de la industria automotriz, a. c. Mexican New Vehicle Market Most new vehicle designs are driven by the fuel economy requirements of U.S., E.U., and/or Japanese markets. Existing manufacturer product plans show that more fuel efficient new vehicles will flow into the Mexican market even without the NOM. The Mexico new vehicle market is not large enough to drive vehicle design or to make unique designs economically feasible. 16

17 asociación mexicana de la industria automotriz, a. c. Mexican New Vehicle Market - Continued Many new vehicles designed for other markets are adapted by manufacturers for Mexican Conditions that include: 1.More than 70% of the population living at altitudes of 1500 meters or more; 2.Need for all types of vehicles to be able to ascend steep grades at altitude; 3.Highly variable road surfaces and use of numerous types of bumps to reduce vehicle speeds. 17

18 asociación mexicana de la industria automotriz, a. c. Mexican New Vehicle Market - Continued Adaptations which affect fuel economy include: 1.Selection of more powerful existing engines available for most small vehicles and some larger cars and trucks; 2.Changes in transmission gear and final drive ratios on small vehicles and some trucks to address grades (more powerful transmissions); 3.Increases in vehicle ground clearance; 4.Use of tires designed to be durable over Mexico roads instead of lower rolling resistance tires used in other markets. 18

19 asociación mexicana de la industria automotriz, a. c. Mexican New Vehicle Market - Continued Many Diesel models and some efficient gasoline technologies are not offered in Mexico because of poor fuel quality. * Few if any advanced technology models (hybrids, plug-in hybrids, or electric vehicles) are available, given vehicle prices and lack of government purchase incentives. * NOM 86 specifies that as of January, 2009 that all gasoline sold in Mexico should contain no more than 80 ppm sulfur and as of September, 2009 that all Diesel sold in Mexico should contain less than 15 ppm sulfur. However, gasoline and Diesel sulfur levels of hundreds of ppm are still being observed in some areas and it is not certain when compliance with NOM 86 will occur. 19

20 asociación mexicana de la industria automotriz, a. c. AMIA Proposal - Guiding Principles AMIA proposed fuel economy standards based on U.S. CAFE Program for Model-Years: Design basis for North American market; Accounts for differences in vehicle attributes; Includes separate standards for passenger vehicles and trucks; Allows for compliance flexibility through averaging, credits and other means as provided by CAFE; Based on laboratory testing using U.S. drive cycle at low altitude. 20

21 asociación mexicana de la industria automotriz, a. c. AMIA Proposal - Guiding Principles Why Separate Car and Truck Standards Trucks are designed to carry cargo: –Truck engines and transmissions have to ensure adequate performance for fully loaded vehicles –Trucks have higher ride height and greater frontal area –Body on frame construction and other durability features add weight These differences reduce fuel economy compared to cars for a given footprint 21

22 asociación mexicana de la industria automotriz, a. c. AMIA Proposal - Guiding Principles U.S. CAFE Requirements (49 CFR Part 523) Define Light-Trucks as Non-Passenger Vehicles Non-passenger vehicle requirements include: –Ability to transport property on an open bed –Ability to transport more than 10 people –Specifications for cargo and passenger carrying volumes –Capability for off-highway operation »4 wheel drive or GVWR > 6,000 lbs. These requirements prevent inappropriate classification of cars as trucks 22

23 asociación mexicana de la industria automotriz, a. c. AMIA Proposal - Guiding Principles Key Change to U.S. CAFE Requirements to eliminate the possibility of circumvention For 2012 model-year, specifications for cargo and passenger carrying volumes revised to restrict use of expanded cargo carrying capacity via removal of seats to only apply to vehicles that come standard with three rows of seats 23

24 asociación mexicana de la industria automotriz, a. c. AMIA Proposal - Guiding Principles Must Include Appropriate Adjustment for Specifics of Mexican Market: CAFE provides credits for E85 FFVs and advanced technology vehicles that are not viable in Mexico; Some Diesel and gasoline technologies are not viable in Mexico because of current fuel quality – particularly high sulfur levels; Adaptation of vehicles for Mexico reduces fuel economy. 24

25 asociación mexicana de la industria automotriz, a. c. Adjustment of U.S. Standards For Application to the Mexican Market To address the lack of E85 FFVs, incentives for advanced technologies, and Dieselslower all U.S. foot print fuel economy standard curves uniformly by 0.5 km/l. To account for adaptation (displacement, gearing changes, ride height, and tires) of passenger vehicles for Mexico, reduce U.S. fuel economy foot print curves by another 5%. 25

26 asociación mexicana de la industria automotriz, a. c. Adjustment of U.S. Standards For Application to the Mexican Market To account for adaptation of trucks (gearing changes, engine displacement, increased carrying capacities, tires), reduce U.S. fuel economy foot print curves by another 6%. 26

27 asociación mexicana de la industria automotriz, a. c. AMIA Proposal - Guiding Principles Must Provide Adequate Lead Time In the U.S. lead time is a major issue and is usually three to four model-years In addition, no fuel economy regulations currently exist in Mexico Industry needs time to develop plans for compliance Model-Year is Already Here 27

28 asociación mexicana de la industria automotriz, a. c. Lead Time Manufacturers report that two to five years are required to plan for and achieve compliance with new vehicle fuel economy requirements in Mexico. Three model-years (two calendar years) of lead time from the 2012 model-year makes the 2015 model-year the earliest point for compliance. 28

29 asociación mexicana de la industria automotriz, a. c. Lead Time - Continued AMIA proposes that adjusted U.S MY standards apply for 2015 MY in Mexico with U.S. phase-in, so that adjusted U.S MY standards apply for 2019 MY in Mexico. AMIA also proposes for 2012 to 2014 MY in Mexico, to require manufacturer reporting and allow voluntary compliance with credit generation as an incentive. 29

30 asociación mexicana de la industria automotriz, a. c. AMIA Proposal – Passenger Vehicles 30

31 asociación mexicana de la industria automotriz, a. c. AMIA Proposal – Trucks 31

32 asociación mexicana de la industria automotriz, a. c. Analysis of Government and AMIA Proposals A detailed vehicle simulation model-based analysis was performed at the vehicle model level to determine the compliance costs and fuel economy impacts of the government and AMIA proposals. Constant attribute analysis Based on 2010 model-year Mexican fleet data Uses methodology and data previously developed by Sierra Research Inc. for analysis of U.S. fuel economy standards 32

33 asociación mexicana de la industria automotriz, a. c. Analysis Results – Government Proposal Analysis shows compliance not feasible even without considering –Vehicles are not designed specifically for Mexico –Need for lead time Overall impact estimated at 22% increase in MSRP of average light-duty vehicle 33

34 asociación mexicana de la industria automotriz, a. c. Analysis Results – AMIA Proposal Compliance is feasible 2019 MY requirements achieve 11.4% reduction in new vehicle fuel consumption relative to 2010 Overall impact estimated at 5.6% increase in MSRP of average light-duty vehicle 34

35 asociación mexicana de la industria automotriz, a. c. Cost/Benefit Ratio Comparison 35 Assumes NHTSA lifetime mileages, 66% cars, 34% trucks, 5% discount rate, 10 $MN/l, 1.2 markup of MSRP for taxes, in-use fuel consumption reduced by 20% compared to CAFE.

36 asociación mexicana de la industria automotriz, a. c. Comments on Government Proposal NOM must provide at least two full years of lead time to allow for manufacturer planning: –2012 Model-Year is fixed; –2015 Model-Year is earliest compliance date. The NOM must properly account and allow for differences in the fuel economy of cars and trucks of the same footprint: –Provide separate footprint standards. 36

37 asociación mexicana de la industria automotriz, a. c. Comments on Government Proposal - Continued If the NOM is based on something other than the U.S. CAFE regulations, the footprint standards need to be established using the same rational and mathematical techniques used by EPA and NHTSA. 4 The impacts of the NOM should be assessed by performing a thorough cost-benefit analysis. 5 4 See NHTSA and EPA Joint Technical Support Document 5 See EPA Regulatory Impact Analysis 37

38 asociación mexicana de la industria automotriz, a. c. Issues for Cost Benefit Analysis Supply Curve – Defines assumed cost of fuel economy improvement technologies, should accurately account for technology already in the baseline fleet, the fact that fuel economy improvements from application of different technologies are not additive, and that multiple technologies directed at the same target (e.g. throttling losses) may be mutually exclusive. New Vehicle Taxes – Cost estimates have to accurately account for new vehicle taxes which differ substantially between countries. Higher tax rates amplify the cost impact of fuel economy improvement technologies on new vehicle prices and lead to greater reductions in new vehicle sales. 38

39 asociación mexicana de la industria automotriz, a. c. Issues for Cost Benefit Analysis - Continued Discount Rates – Analysis of the cost and benefits of more efficient vehicles need to account for the time value of money and appropriately discount the value of future year fuel savings. Manufacturer Specific Impacts – Manufacturer product lines can be very different and, therefore, so can the costs of compliance with new vehicle fuel economy standards. It is not appropriate, particularly for attribute based standards, to simply use a fleet average vehicle and average required fuel economy increase to estimate changes in new vehicle prices or economic impacts. Rebound Effect – Accounts for the fact that motorists will, all other things being equal, travel more miles in more fuel efficient vehicles. 39

40 asociación mexicana de la industria automotriz, a. c. Issues For Cost Benefit Analysis - Continued Real World Driving Impacts – Fuel economy standards are linked to test cycles and procedures. Differences in real world driving patterns and conditions (for example: driving at altitude), can affect the actual benefits of fuel economy standards. Fleet turnover effect – Because more efficient vehicles cost more, vehicle sales are decreased, all other things being equal. Because the demand for travel is not changed, older vehicleswhich are generally less fuel efficient and have higher emissions of air pollutantsare retained longer and operated more. 40

41 asociación mexicana de la industria automotriz, a. c. Issues For Cost Benefit Analysis - Continued Leakage - In Mexico, unlike the United States, leakage in the benefits of new vehicle fuel economy standards could occur via the importation of old vehicles from U.S. Leakage like the fleet turnover effect will increase as new vehicle prices increase, and lead to diminished benefits because of operation of a greater number of older, higher emitting and less fuel efficient vehicles. Costs of Increased Emissions of Air Pollutants - If the analysis is assigning monetary benefits to reductions in GHG emissions, it must also monetize the impacts associated with increases in emissions of ozone precursors and toxics from rebound, fleet turnover, and leakage. 41

42 asociación mexicana de la industria automotriz, a. c. Summary of AMIA Proposal Based on U.S. CAFE Program –Separate car and truck standards –Compliance flexibility as CAFE (among others: credits, incentives, averaging, etc.) Standards adjusted to account for Mexican Conditions –0.5km/l for credits plus 5% for cars and 6% for trucks. Includes lead time necessary for compliance –Three model-years –Adjusted 2012 U.S. standards to apply in


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