Recently, President Obama ordered North American car companies to increase their average fleet mileage standard by 30% over the next seven years. This marks a significant increase from the current 27.5 miles per gallon (mpg) level to 35.5 mpg.

Despite efforts by governments to legislate fuel efficiency by setting Corporate Average Fuel Efficiency (CAFE) standards, consumers in both Canada and the U.S. continue to purchase vehicles that meet their needs, but not necessarily government fuel-efficiency targets.

A recent article by Canadian auto industry analyst
Dennis DesRosiers put these challenges into a Canadian perspective. According to DesRosiers, consumers in Canada tend, on average, to purchase more fuel-efficient vehicles than our southern neighbours.

However, the average fuel efficiency of Canadian vehicles has increased by less than 10% over the past 20 years and, as of 2007, stands at 9.82 litres/100km. This figure is 13% below the U.S. CAFE standard. Average fuel efficiency of U.S. passenger cars is 10.5 litres/100km.

Looking forward, it is unlikely that these new mileage standards will have a significant impact on U.S. oil imports or on CO2 emissions for four key reasons.

(1) The North American auto-buying public continues to have a strong preference for larger, safer and less fuel-efficient vehicles.

(2) According to the Conference Board in Canada, shrinking auto-industry profits into 2013 will severely curtail investment in new, more fuel-efficient technology.

(3) Failure by Chrysler, and possibly GM, to honour long-term debt obligations will limit access
to credit.

(4) Recently proposed U.S. energy taxes (in the form of cap and trade) and dramatic cuts to dealer networks will hurt auto sales.

Given the cumulative drag that these above factors are putting on the Big Three, it is hard to imagine that any of them will still be around in seven years to see the new fleet mileage standards come into effect.

Data sources: R.L. Polk & Company and DesRosiers Automotive Consultants.
Chart: Reed Construction Data — CanaData.