How Does Fiat Chrysler's CAFE Standings Affect Consumers?

Ram FCA future 1 II

By Tim Esterdahl

In the next decade, automakers will see federally mandated corporate average fuel economy standards rise dramatically. These new targets will be easy for some to reach, like Toyota and Honda. These automakers sell a lot of small cars, hybrids and electric vehicles, which give them lots of credits. Other automakers like Chrysler (newly renamed Fiat Chrysler Automobiles) — best known for muscle cars, minivans and pickup trucks — don't get the same amount of credit.

The EPA released a report in April that said most automakers are on track to meet upcoming fuel-economy targets. And those that may struggle — like FCA — are buying credits in preparation for offsetting fines. Buying credits is a short-term solution for FCA; long-term it is fraught with issues for the company and Ram Truck buyers.

Without selling a large number of cars to offset these requirements means the sales success of Ram may actually hurt FCA in the long run. Without a strong-selling fuel-efficient vehicle to help offset those sales, it is feasible that FCA could lose substantial amounts of Ram profits to either buying credits or paying a hefty fine per vehicle each year.

 

What Are EPA Credits?

Before we go any further, it is important to understand what an EPA credit is and how it benefits automakers. EPA credits, or emission credits, are given to manufactures that produce vehicles that are more fuel efficient than the minimum requirements state. Also, if an automaker sells electric vehicles, it gets added credits as well.

This is important to many automakers that take these credits and apply them to less fuel-efficient vehicle sales. For example, Nissan and Toyota control 60 percent of all credits available when calculated from the previous report — a whopping 136.7 million when combined (click here to download full report). Not coincidentely, both these companies sell an abundance of small cars and EVs. This allows them to simply apply a credit from these cars toward every truck sold that doesn't meet the requirements. To be fair, Nissan and Toyota sell a relatively small number of pickup trucks, and this also works in their favor.

 

Ram FCA plans 3 II

 

Another report gives the reasoning behind buying the credits. An April 2013 National Highway Traffic Safety Administration (download summary report here) shows Chrysler's 2013 model-year light truck CAFE number was 24.5 mpg. The target for light trucks is 25.3 mpg for that year.

While Ford and GM are also struggling to hit their targets, Fiat Chrysler doesn't sell nearly the car volume the others do. Also, GM sells the electric Chevrolet Volt in good numbers, which will provide credits to offset its truck sales.

As you can see, CAFE rules affect each automaker differently; however, one point is clear: Automakers who build larger, less fuel-efficient vehicles are going to be penalized more.

 

Chrysler's Car Problem

The biggest problem facing Fiat Chrysler is its poor car sales. While Ram is putting all sorts of new technology into its trucks to improve fuel economy, it would be more helpful if FCA had a top-selling fuel-efficient car.

John Voelcker of Green Car Reports said FCA is really behind in developing a fuel-efficient solution to meet pressing CAFE needs. He said FCA hasn't sold a modern hybrid, and the Fiat 500e is really just a compliance vehicle for California emissions standards. The Fiat 500e, he pointed out, costs FCA nearly $10,000 for each vehicle it sells. But FCA has to offer it to meet standards.

Why doesn't FCA just develop an electric vehicle? Voelcker said it is expensive and time consuming to develop EV technology. Fiat bought the component technology for the Fiat 500e from Bosch but did all the integration and controls engineering in-house (this is why the vehicle costs the company so much). In order for FCA to completely develop its own EV, it is potentially looking at three years (minimum) of development time and a large pile of investment cash.

FCA's big problem, according to Voelcker, is "nobody goes to [FCA] dealers for cars. They are so known for their trucks."

All of this begs the question: Why is FCA pushing so hard to sell pickups when it really needs to focus on cars like the new Chrysler 200? Voelcker said FCA needs the money.

"Ram trucks are extremely profitable, which is good because Chrysler needs the money to develop more fuel-efficient cars," he said. "The cars you sell today will pay for the vehicles you sell tomorrow."

 

Emissions Credit Market

FCA really has three options when it comes to improving its fuel economy numbers. It can:

  • Increase fuel economy across the lineup (see Ram innovations and the new Chrysler 200 sedan).
  • Pay fines to the EPA when it misses targets.
  • Buy credits from other automakers.

Officially, the April EPA report states that FCA bought 500,000 credits from 2011 model-year sales from Nissan. Also, the EPA says that Chrysler paid CAFE fines in 2006 and 2008. Fiat isn't any better and paid fines in 2008 and 2010. These fines are, in part, the main reason for Ram's recent push to be more fuel efficient.

 

Ram FCA plans 2 II

 

The problem with buying credits is that other automakers aren't under any obligation to sell them. For example, Toyota will probably let some of its credits expire rather than sell them. Some have suggested Toyota doesn't need them, nor does it need the money.

Paying fines doesn't make a lot of sense either. While critics have argued that the fines are too low to have a significant impact, Chrysler did pay a little more than $30 million in 2006 (when it was DaimlerChrysler). This may not seem like a lot in the grand scheme of things, but continually paying fines like this each year is not good business.

 

Ram Fuel Economy

For the past few years, Ram has been introducing all sorts of technologies to improve fuel economy. Nick Cappa, Ram spokesman, said it is also customer demand that is driving better fuel economy.

"Our research tells us that fuel economy is the No. 1 unmet customer need in half-ton trucks, and we own the top two spots [25 mpg highway with the Pentastar V-6 and 28 mpg highway with the EcoDiesel V-6]," Cappa said. "The numbers tell the story. Our strategy works. Ram's powertrain offerings set the standard. In the fuel economy race, we are clearly ahead of our competitors."

While what Cappa says is true, it is also true that Ram, like all automakers, is focusing on meeting CAFE regulations.

What does this mean for current and future truck fans? It's likely you will continue to see bigger incentives from Ram (especially for fuel-efficient models like the EcoDiesel and V-6 variants) as well as continued innovation for even greater fuel efficiency. FCA needs the continued profits from these full-size truck sales, and it needs to sell more fuel-efficient models of its best-selling models.

Also, it's important to note that with FCA research and development money being poured into new, more fuel-efficient cars, it is unlikely that Ram (or Jeep for that matter) has the funding to develop an all-new midsize pickup competitor.

In the end, FCA is dependent on Ram Truck (and probably Ram Commercial, too) to sell a lot of vehicles to help subsidize and fund future vehicle research and development. And that dependence could translate into more options, technologies and new types of pickups for Ram buyers.

Cars.com/PickupTrucks.com images

Editor's note: This story was modified on May 14, 2014, to more accurately describe the development responsibilities of the Fiat 500e.

 

Ram FCA plans 4 II

 

Comments

3 options, no 4: Produce compliant vehicles that people actually want.

Looks like someone needs to update the hemi so that its E85 capable.

We don't need E85.

E85 is not efficient as gas. My Ram is E85 compliant and the manual out right tells you that you will get worse fuel economy using E85 fuel.

We need to dump all these fuels that contain ethanol because all it does is hurt fuel mileage and it destroys engines. I am now having serious problems with my boat engine due to the 10% fuel.

What really need to go is the EPA, they do more harm than good these days.

My Ram with the Pentastar V-6 and 8 speed transmission is a great truck. It gets good fuel mileage and drives and tows just as good as the 2008 Ram I traded in for it. This Pentastar V-6 tows just as well as the Hemi did and in normal driving it feels just as good as the Hemi did.

More regulations are not what we need, cars burn clean today, hell they have for years now yet we have the EPA demanding more and more. I was listening to a radio show yesterday and they were talking about the EPA regulations and how they are killing the trucking industry.

E-85 is a dud. It started off way cheaper then 87 octane gas, now it's not much cheaper and you burn almost 30% more to get the same miles. It can make a bit more power, and if a vehicle was built for only e85 it could run a bit more compression, for a tad bit better mileage.

I have to go about 75 to find e-85. Many others need to go further. You can burn more fuel, and now you're going to pay the extra cost in getting that fuel transported to the pumps.

Good thing Toyota sells lots of boring little gas mileage cars, with a Camry at the top. They make up for sucky mpg ratings on their (on top in 2008) behind the times Tundra, and mediocre mileage Tacomas.

Chrysler makes alot more suvs then most others. Their new 200s will be a good seller, it's just not as high on the mileage list as the Prius types, and the Ford ratings with a turbo engine, they don't get so good mileage when driven somewhere hilly. Add up the recommended higher octane gas cost, and then how much are saving? Mid grade isn't just 10 cents more a gallon.

I want to see a Cummins diesel-electric in the HDs. Cummins and Eaton partnered up to do a diesel-electric hybrid version of the ISX for the big rigs, so why not bring that technology to the ISB or ISV? Better yet, make it a series hybrid instead of a parallel hybrid.

Now I understand why the made-in-Mexico Fiat trucks are leading the way in high-mileage technology. They don't have any choice. What a stupid maze of stupid rules from the EPA.

And now I understand why Toyota is standing pat with the Tundra. They can afford to take their time, do their research and come in with their solution after the dust settles.

All this talk about pickups having to meet a certain CAFE standard of umpteen mpg is nonsense then. It's all about the company sales. Unless Fiat comes up with a Prius alternative that sells a million vehicles a year, RAM as we know it is dead. Thank the EPA.

Fiat made a financial announcement earlier this month where they acknowledged some of the extraordinary costs of the Fiat Chrysler deal a few years ago.

This January thru March financial report shows that they kicked a total of 3.6 BILLION into the UAW's health insurance trust fund. If you buy a new RAM ask yourself if that gives you a warm feeling, or better gas mileage.

E85 is a GREAT DEAL if you are a blender, refiner or corn farmer. For the rest of us, not so much.

I think Ram is on a role with increasing the mileage of it's half-tons and increasing the capability of it's three quarter tons and one tons. Most people who buy a half ton don't need to pull a whole lot. Maybe a boat, trailer or rv, but nothing serious. If they can meet those needs and still offer better fuel economy I would imagine they'll do just fine.
also, remember the next generation minivan will be the first Chrysler to be a hybrid. I would think the system will filter down to other products.
Lastly i think the EPA needs to be reined back a bit. It has a purpose but has gone way past its essential mission.

Say what you want about unions but the fact is if the UAW folded the price of vehicles would still be the same. You really think that Ram, Ford or GM will reduce the price of their trucks cause wages are lower? Not a chance in He!!.
FWIW Ram trucks are still the best bargain out their. Ram incentives make it that way.
Only reason that nonunion Toyota employees make what they do is because Toyota needs to offer competitive wages equal to unions. Once unions are gone wages across the board will fall. Just what republicans want. Cheap labor. Then no one can afford anything and tax revenues will drop, meaning massive cuts in services. Can you say Tea Party.

Ram is doing good with the addition of the V6's, but in the V8 is okay, when the new Ford and GM comes out with its eight speed its going to be behind on V8 fuel economy. I think in a few years Chrysler is going to hit a brick wall and go into bankruptcy again, only this time it may be their third strike. If ram is lucky it will become an independent company but we will have to wait and see.

I don't really like the new Chrysler 200, looks like an intrepid to me.

Making the Hemi flex fuel capable wouldn't be about actually boosting economy, it is about gaming CAFE. Currently you get a big CAFE boost for having E85 capability. Truth be told I think that changes in 2017 or 2018 to something more strict, so there probably isn't time to really get much out of flex fuel capability anymore.

Where E85 can make an enormous difference is if used similar to water/methanol injection - to drop temps and allow for greater compression ratios and better energy extraction from fuel. This would also solve the deposit issues that all DI engines are having.

Can we just get rid of ethanol in gas already?

e85 was based on a lie and Al Gore admits this. It hurts the environment more, makes food cost more, and gives you worse mileage. Al Gore said he lied about E85 to get votes from farmers when he was running for President.

The EPA hurting the pickup trucks. Trucks are made for work not fuel mileage. In the future you won't be able to get a v8 in a truck and they be made of plastic.

Mark Phelan: Don't bet against Fiat Chrysler meeting goals.

If CEO Sergio Marchionne and his Fiat Chrysler Automobiles team went to the track to bet on 10 horses, I’d follow them to the window and put my money on the same 10 nags.

“The new plan is very ambitious, but so was the last, and they accomplished it,”

The focus this week was on brands and sales, but the smart money will be watching the new four-cylinder engines Fiat Chrysler is developing. It’s impossible to overestimate their importance to the company’s future.

http://www.freep.com/article/20140511/COL14/305110066/1210/BUSINESS01/Mark-Phelan-Don-t-bet-against-Fiat-Chrysler-meeting-goals

Only car I'd ever buy from dodge is a Challenger. The other cars look like crap to me and my friend got a brand new Avenger with the R/T pack. He only has 2,000 miles on it and all the paint in front of the back wheels is peeling off even under the rock chip protaction tape, plus the trunk lip is rubbing the paint off the rear bumper. He when to the dealer and they won't fix it and 8 other dodge avenger car owners are having the same problem. He even call one of the dodge reps and they just gave him a simple we don't care we won't fix it bull crap line.

Well this explains why Toyota made no changes to the latest Tundra in terms of trying to improve fuel economy. They don't need to. They just use all their 'credits' from the fuel efficient cars to cover any fines from not meeting pickup truck requirements. Credits, thats what makes the whole CAFE a pile of crap! Fines aren't much better, just a money making scheme for the federal gov't. I think the real problem is lack of a REAL incentive. Instead of corporate average, just develop specific fuel economy requirements for each individual vehicle. If that vehicle doesn't meet the fuel mileage requirement, the the manufacture can't sell it in the U.S....period. No credits, buying credits, borrowing credits, fines, etc etc. I promise the manufactures will find a way to meet those requirements as profitable as the big trucks seem to be.

You can keep your hybrid crap as well. Been there done that with a Honda Accord Hybrid. Engine had a multi cylinder misfire from day one and Honda never could fix it. When the Hybrid batteries go bad it costs thousands of dollars to replace them.

I will never again buy a hybrid vehicle.

The EPA is killing America but then again I think that is the Democrats plan.

@Dale Milner

You must be smoking the REALLY good stuff!

If you believe that you can add 3.6 billion dollars to Chrysler/Fiat's cost of doing business WITHOUT it affecting the buyers of their cars and trucks, that must be the real Maui Wowie in your pipe!

Fiat paid a big price to gain access to Chrysler's network of customers, dealers and vendors--just like Daimler did. Adding billions of dollars to that cost was a big hit to Chrysler's customers in North America but for the UAW and their friends in politics....can you say PRICELESS?

Daimler only bought Chrysler for the cash they had at the time. Once Daimler was through raiding the available cash they dumped Chrysler. Not to mention that Daimler lied when they merged saying it was to be a merger of equals when in fact it was to raid the Chrysler cash on hand.

I have no respect for Daimler/Mercedes.

It is Daimler who really drove Chrysler towards bankruptcy the second time.

@Big Horn 1500

Daimler paid almost $40 billion to buy Chrysler.

How does bringing that many dead presidents to the party hurt Chrysler's cash position?

It's time we get a Clinton back in the White House.

Hillary 2016!!!

papa jim, What dealer do you work for?

All I can say is I told you so.

Maybe to some of the guys like DiM should actually research some of the discussion that has occurred here on PUTC regarding the impacts of US regulations of large vehicles, especially pickup trucks.

But after 50 years of DOT, chicken tax and your EPA has moved the US in a direction different from it's competitors.

It seems some of you guys will cut off your nose despite your face.

Fiat need to sell as many diesel Rams as possible. They might become cheaper then. We can only hope. At the moment because they are novel, Fiat is charging a premium for it's diesel Ram 1500 pickups.

I know we pay the same for a V6 diesel as a V8 gasser.

Today the French Government says we only have 500 days left until the earth is destroyed by global warming. So who cares if your pickup is earth destroying machine cause we can't change it, we only have a short time left so if driving your gas guzzling pickup makes you happy then drive it cause you only have a short time left.
( come to think of this if you can't afford one get a new pickup with a $900/month for 84 month loan cause you'll never have the time to pay it off and nobody will be around to repo it )

Remember all those funny hybrid jokes about Toyota; remember when Toyota had a crap ton of credits?

@Casey- what kinda crap are you smoking cause its making you stupid!!

Don't tease me with the Jeep Gladiator any further!!

I told these buttclowns at Chrysler they could slam the entire market with a diesel/electric hybrid. Plenty of power with a diesel genset charging and keeping the batteries up and running. The genset would only burn 1 gal diesel per hour of full electric operational power. Would be no problem achieving 65-75 Mpg ... then throw in the bio-diesel effect. Paaalease! they would own the market for years to come.....

This explains why Ram hasn't been too concerned about cargo capacity and has been focusing on mpg instead.

Lets turn all of our 1/2 ton pickups into cars with 6 1/2 feet of waited space in the back.

FCA has said that they will not use aluminium in their pickups like Ford but will most likely use it in vehicles like the Jeep Wrangler.

https://www.youtube.com/watch?v=vi9EtMiS5fc

@Big Al

You are forced to stand logic on its head again because diesel engines cost more to build than gasoline engines of similar output.

Al says, buy more diesels so the price will come down.

FCA has said that they will not use aluminium in their pickups like Ford but will most likely use it in vehicles like the Jeep Wrangler.
Posted by: Lou_BC | May 14, 2014 5:32:52 PM

Actually they are saying they will use aluminum in the pickups. Like GM, Ram will jump on the "me too" bandwagon after initially bashing it.

"We'll make the deadline. We can do aluminum in '17," Marchionne said. "We have the technology in-house."

@papa jim,
That was your logic regarding the chicken tax.

To have more fish for less fisherman. Remember the pond?

I've seen you write that the size of the US market dictates the cheaper costs of vehicles.

Diesel is different? Why?

Years from now, the only manufacturers making decent pickups will be Ford and Toyota (maybe Nissan) cause they are the only ones that make/sell fuel efficient cars that people actually like. I wouldn't buy ANY POS car made by Chrysler other than a Viper--and I'd actually rather have a Corvette... .

@Big Bob - "Marchionne: Aluminium Better Used In Wrangler Over Ram 1500"

That was from TTAC news story posted yesterday.

@Big Al - odd, DiM is no where to be seen........... cue the crickets chirping...........

@BAFO - Detriot, Big 2.5 OEMs relinquished the mid-size truck market to those that could do a better job of it. And profit from it, somewhat. OK, not so much...

I'm sure Toyota and Nissan were dancing in the streets because of it. All the million+ trucks they'd each sell a year!!! Almost.

And Mitsubishi and Mazda are all set to shut down their US car factories while they switch back to building trucks??? Like Before? Not quite.

By the way, what "Chicken tax" causes Mitsu and Mazda to build cars in the US/Mexico? And not import them???

If the DOT and EPA encouraged big V8 cars and trucks, any OEM, from anywhere could have joined in. Off Shore OEMs were lukewarm on the concept. But there's only one way you can get the Nissan Titan. With a V8. And horrible mpg comes standard! Only the Raptor gets worse mpg. Not by much though.

But you're not the voice of global pickup OEMs. They likely don't feel the urge to sell a handful of trucks to ungrateful American cheapskates, including fleet and other bottom feeders.

And 50 years ago, Europe (and aligned nations) had the choice of adopting refined and well defined, US regulations as their own (they had none at the time), or dreaming up their own, differing slightly (but just enough) and basically 'zigging' everywhere ours 'zagged'. Clearly unabashed protectionism, on Europe's part. Like the world has never known. Anyone that doubts that, can look at the tariffs Europe imposes on all import vehicles. Also, like the world has never known. That leaves absolute zero doubt, Approx 4X the tariffs the US imposes.

Clearly you haven't done the research, before spouting off. Try it some time, BAFO.

What's up Lou_BabY???

@Tim Esterdahl - Actually, paying CAFE "fines" makes more sense than it may sound. 30 million in fines is huge payout, but spread out over, around 2 million FCA autos, that's what, about $15 bucks per?

But back when Chrysler was paying fines, they were still heavily promoting the "HEMI V8". That whole "That Thing Got a Hemi??????" campaign was too much. And it's not even a real "Hemi".

So today, FCA is pushing the Eco Diesel optioned Ram, plus the Pentastar V6. And cylinder deactivation on the "Hemi". To avoid possible (but not likely) fines, yes, but mostly to stay competitive with Ford and GM.

FCA (and Ram specifically) won't have any problems keeping up with the CAFE schedule without having to pay fines or buy credits.

There's more work to be done at Ram Headquarters, but there's more options to explore, like aluminum bodies and turbo'd V6s, in the 2.7 liter range. And who knows what technology is still untapped?

Lou, That blog may have been posted yesterday but is a week old news. It also doesn't state the Ram won't use aluminum in their pickup. Just not right now! Get your news from the original source. TTAC cheat's off of other's people work and gets it wrong.

2017 Ram pickup may get aluminum body, CEO says
http://www.usatoday.com/story/money/cars/2014/05/06/fiat-chrysler-ram/8748657/

It will be like Ram and the urea-free trucks. First, it was we are so awesome, we can do it better without urea. Then a few years later they figured it out and caught up. The aluminum bodies will be a good thing for Ram, but it will be intersting to see both Ram and Chevy vans back away from the aluminum body sucks argument in 2017, that is if this site or the comments are still around by then. There will be a transition period. At first they will stick by their original argument when the Fords start getting a lot of praise, but a couple years from now we won't hear a single complaint about aluminum and we will be hearing the "just wait" for Ram's aluminum bodies and a 10 speed.

@Lou_BC
Thought I heard someone flushing the toilet ;)

@BAFO - That was your mom upstairs, getting ready for work. That's what happens when you live under a parent's bathroom for free.

But you obviously have zero response to my reply for you're a common troll, living in your mom's crawl space.

Casey and Dale are sucking on the same bottomless hookah! and why do the Ram 1/2 ton trucks weigh in at over 6K? sure it was a Big Horn diesel, but my word that is a heavy truck, no wonder it an only carry just over 1k!

Big Al

That was clearly a fine 4 day midsize truck debate you guys had on TTAC. Denver Mike, PCH 101 and Scout Dude threw everything they had in their BS comment barrel at you guys and you proved them wrong every time.
That was not the toilet you heard flush it was Denver Mike dropped the oxygen bottle as he passed it to PCH 101. Vulpine/Road Whale beat the breath out of them that forth day. They lost credibly on TTAC.

@ Brand X - They have never been able to definitively refute the fact that chicken tax has shaped the truck market.

@BigBob - FCA headed by Marchionne has done well but the problem with their transparency or attempt at it; it makes them look like the flip flop kings of the auto world.

I am sure that they will have to do something since they admittedly do not have the emissions credits to get away with selling their current fleet.

Toyota could sell them credits but I'm sure they will not because it will hurt FCA to get fined and be forced to catch up. It also hurts Toyota to throw a bone to any competitor.

@Lou_BC - The Chicken tax might have shaped the '80s mini-truck craze/fad/invasion, but that's about it. The rest was the market soundly rejecting compact trucks. Small truck OEMs responded by blowing them up to 9/10th's the size of (then) fullsize trucks. That just further alienated/infuriated small truck extremists.

Small trucks enjoyed mainstream appeal for a brief moment in time, but it could last forever. Same with molester, custom vans. Hair bands? Perfect Storm for those.

Life is unfair and cruel to those living in the past, Mullet Lou...

F.C.A. will need to purchase up some more credits... The wife and I are looking at buying a Dodge Durango next year. Might have to wait to see what the 2018 Jeep Grand Wagoneer is going to look like?

@DenverlllMike - you keep bringing up "molester vans"................ is that supposed to be part of your therapy?

Why live in the past when one is completely delusional in the present ;)

@Lou_BC - See that's exactly what I don't get. Your's and BAFO's reason for trolling. You won't respond to the topic, once I call you out on your nonsense BS. But I guess you do it for my amusement? It works!

You just repeat the same tired 'talking points', but cannot engage in an actual debate because you've got nothing. Zero. Zilch!

I don't mind dispelling common myths, wives tales and misconceptions. But by now you know the truth, so what gives?

Your motivation is totally unclear. Are you and BAFO paid by some propaganda machine? Annoyed by the US as we suspect many foreigners are? You have good reason to be, I'll give you that. But let's call it what it is.



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