New fuel rules may favor smaller & luxury automakers

The long-awaited proposal to require fuel efficiency standards of 35.5 miles per gallon could give certain automakers an advantage. The proposal, which could be presented as early as this week, is said to include a loophole based on a provision in the California standards which give impose less-stringent emissions requirements on automakers with fewer than 400,000 annual sales in the U.S. market.

In spite of complaints from Chrysler, Ford and General Motors, Jody Freeman, a White climate advisor, said the provision was part of a deal reached last May and will be part of the final regulation. The deal, which included the major car makers, combined California and federal standards to provide a single, national standard. Compliance with such a standard would be less for automakers, who previously were looking at one federal standard and standards for California and the other states that had adopted its requirements.

The exemption will provide the most benefits for luxury carmakers like Aston Martin, BMW, Mercedes and Porche. Under the old fuel economy standards, car makers could avoid compliance by paying hefty fines and then passing the fines along to customers. Under the Clean Air Act, which covers emissions, compliance is mandatory and fines cannot be substituted for meeting the required standards. However, automakers can use things like improvements in air-conditioning, power steering and other parasitic systems to comply with the emissions standards, reducing the necessary fuel efficiency standard that must be met.

Other companies eligible for the relaxed standards include Mazda, Mitsubishi, Subaru and Suzuki. Kia may qualify depending on whether or not its sales are lumped with those of parent company Hyundai. Sales of the Hyundai brand were over 400,000 units in 2008.

The exempted brands, even if Kia is included, accounted for just 13.84 percent of all light vehicle sales in the U.S. market in 2008. The vast majority of sales are concentrated in just seven car companies: GM, Ford, Chrysler, Toyota, Honda, Nissan and Hyundai.