CAFE Fines

By Ian Grasso

01.02.2008

I’ll admit it; I am an unabashed Mini fan. They provide, without a doubt, the most fun you can have in a car under $20,000. The higher-priced Mini Cooper S is quite a performer and a staple of SCCA Auto Crossing events across the country. But they are no doubt an anomaly in the U.S. market with their micro machine size, super tight steering and relatively rough suspension. To sum it up, the BMW-built Mini is a tried and true Euro-hatch, a breed thought for many years to be non-grata outside of enthusiast circles in the world’s most important car market. They sell fairly well but they are by no means a best seller, and are no doubt built and exported to the U.S. at very low margins because of the current exchange rate between the euro and the dollar.

If you look at the recent CAFE fines, you will understand why BMW takes on the expense of exporting the 40 MPG Mini to the United States. The German automaker paid $27,985,925 in CAFE fines in 2001 – the same year that BMW began production of the iconic British nameplate. This year they paid $5,056,012 in fines, after 4 straight years where they only paid a total of $272,000. There is no doubt that big sales of the 3 series and X5, along with slower sales of the Mini at the end of its product cycle have contributed to this sudden jump for BMW. Porsche and Ferrari also send quite a bit of money to the U.S. Treasury, as they are fined millions of dollars every year for their sports cars and have no small car to balance out their fleet average.

Poor Chrysler, they are on the hook for $30,275,920 in fines. Of course, as the company was known as DamilerChrysler during the reporting period, there is no doubt that the Germans will be paying a majority of these fines for their decidedly non-stingy Mercedes-Benz models. I hope they aren’t paying too much in fines for the horrid R-class, if so, what a waste. Mercedes’ fleet economy will no doubt be improved by the introduction of the Smart Car in America in 2007/2008 – the CAFE rules state that any car with sales over 10,000 can contribute to fleet fuel economy.

The fines are calculated by assessing a penalty of $5.00 (recently increased to $5.50) per tenth of a mile below the federally mandated fleet fuel economy of 27.5 MPG. Interestingly enough, no major U.S. or Japanese manufacturer has ever paid a CAFE fine – specialty maker Panoz has paid a total of $17,592 for their low volume, high performance vehicles. That being said, there is no doubt that the cost of CAFE is directly passed on to the Euro-buying consumer, so don’t feel too bad for our friends on the other side of the big lake.

The full report is available here. Some of data referenced in this post was previously published in Autoblog and The Truth about Cars.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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2 Comments

  1. It’s interesting to think about the cost-benefit of sucking up and paying the CAFE fines rather than investing billions of dollars into expensive fuel saving technologies. Much of the “low hanging fruit” (aerodynamics, efficient combustion, 5 and 6 speed automatics, CVTs, etc.) have already been implemented. Diesels, hybrids, aluminum/magnesium/carbon fiber, and other solutions will be expensive to implement.

    I also find it interesting that for all the flak the Big 3 take for their poor fuel economy, they don’t have a CAFE fine (I’m guessing the DCX fine will be weighted heavily, if not completely, to Mercedes-Benz and Maybach), yet VW did have one. What the heck does VW sell that would screw up their CAFE numbers? Must be a combination of large Audis, Touaregs, and Lamborghinis, I guess, because I doubt that the VW lineup itself is worse than the CAFE number.

  2. If GM or Chrysler or Ford could sell as many small cars as Honda or Toyota, they wouldn’t be getting ready to cancel their future performance engines and car models. They could offset the gas-guzzlers with small-car sales.

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