WARDSAUTO FUEL ECONOMY INDEX: STATE OF THE INDUSTRY

Transcription

1 2015 WARDSAUTO FUEL ECONOMY INDEX: STATE OF THE INDUSTRY 2015 WARDSAUTO GROUP, A DIVISION OF PENTON

2 2015 WARDSAUTO, A DIVISION OF PENTON

3 Written and researched by Erin Sunde, with Al Binder Additional research: Rebecca Norris and Paul Zajac Edited by John Sousanis DESCRIPTION This reports examines average fuel economy of new light vehicles (LVs) sold in the U.S. during calendar year 2014 as measured by the WardsAuto Fuel Economy Index (FEI), in comparison with prior periods back to Q4 2007, the Index Base Period (IBP). The WardsAuto FEI is a weighted sales index, designed to show directional change in the fuel economy of new light vehicles (LVs) sold in the U.S., and to offer comparative views of LV fuel economy across models, brands, segments and time periods and to provide insight into changes in consumer behavior and vehicle technology improvements as they pertain to fuel economy over time. The index uses manufacturer reported model-line LV sales, annual engine installation rates, and the associated EPA combined city-highway window-sticker fuel-economy rankings to calculate the relative average fuel economy of light vehicles sold in the U.S., by model, brand, segment and power type, using the arithmetic mean in calculating averages. (See WardsAuto Fuel Economy Index: Methodology for more information.) ABOUT WARDSAUTO WardsAuto has been a trusted source of automotive information for over 80 years. WardsAuto provides global automotive intelligence to OEMs, suppliers, government agencies and analysts through multiple products and services, including WardsAuto.com, and WardsAuto Premium Services and Forecasts. For information and comments about this report contact: Erin Sunde, Industry Analyst, WardsAuto (248) esunde@wardsauto.com For more information about WardsAuto products and services contact: Lisa Williamson (248) lwilliamson@wardsauto.com WardsAuto Group, a Division of Penton 3000 Town Center, Suite 2750, Southfield, MI

4 Contents Description WardsAuto Fuel Economy Index: State of the Industry Summary Availability and Demand by Index Rating Fuel Economy by Vehicle Type &Segment Cars Light Trucks Fuel Economy and Fuel Costs Fuel Economy by Power Type HEV v. Gas-Powered Variants: Penetration, Cost & Fuel Economy Hybrid and Electric Vehicle Penetration Hybrid & Electric Vehicle Registrations by State Battery Electric Vehicle (BEV) Penetration in ZEV and non-zev States CAFE Performance Index Measuring Progress Toward Future Standards Model Year Powertrain Profile Engines Transmissions Turbocharging WardsAuto Fuel Economy Index: Methodology

5 1. WARDSAUTO FUEL ECONOMY INDEX: STATE OF THE INDUSTRY SUMMARY WardsAuto Fuel Economy Index BASE FEI Rating (MPG) Yr/Yr % Chg. 3.3% 3.3% 0.9% 1.9% 4.3% 2.3% 2.2% 5% 4% 3% 2% 1% 0% Average Fuel Economy of new U.S. Light Vehicles rose to a new high of 25.0 mpg in 2014, a 2.2% improvement from Source: WardsAuto Fuel Economy Index 2015 WardsAuto, Penton Fuel Economy Improvement Continues to Slow in 2015 Light vehicles sold in the U.S. achieved record-high fuel economy in 2014 even as fuel costs declined. According to the WardsAuto Fuel Economy Index, new light vehicles (LVs) sold in the U.S. had an average fuel-economy rating of 25.0 mpg (9.4 L/100 km) in 2014, a 2.2% gain over the prior year. The improvement was due to the increasing efficiency of vehicles across segments. A 3.9% drop in the average price for gasoline moved some consumers to larger, less-efficient vehicle types, thus slowing the rate of improvement. In 2014, the sales share of vehicles in the mpg ( L/100 km) range of the index surpassed that of the mpg ( L/100 km) range for the first time. The percentage of models offered in the mpg range continued to grow, reaching 22.2%, but remained well behind the mpg range s 34.6% penetration. Among indexed vehicles, light trucks outsold cars for the second consecutive year, accounting for 52.6% of indexed sales, while averaging 21.1 mpg (11.1 L/100 km), up 2.8% compared with the prior year. Passenger cars improved 2.9% from 2013, averaging 29.2 mpg (8.1 L/100 km) on the index. All eight WardsAuto vehicle segments exceeded previous index highs in

6 Midsize cars are nearing the 30 mpg (7.8 L/100 km) benchmark with a 29.6 mpg (7.9 L/100 km) rating in 2014, but have shown significant drops in market share. Luxury cars rated higher than the light-vehicle average for the first year in Cross/utility-vehicles (CUVs) comprised the largest market segment for the sixth consecutive year, 27.3% in 2014, and are the highest rated light-truck segment, scoring higher than large cars. In the three previous years, the average cost of gasoline per 100 miles driven was above $15. In 2014, the cost dropped down to $ Hybrid models lost market share to gas models in that year. However, plug-in hybrids and electric vehicles show small but continuous growth in market share. According to the WardsAuto CAFE Performance Index (CPI), which rates automakers current fleets against EPA and NHTSA standards for future model years, the average unadjusted fuel economy of light vehicles needs to improve 57% to meet 2025 goals. Small and midsize cars are closest to their requirements, while large cars and SUVs need the most progress. To reach those CAFE standards, automakers are moving to smaller engines and advanced transmissions. Four-cylinder engines powered 52.2% of U.S. LVs in model year 14. The penetration rate of 8-speed automatic and continuously variable transmissions increased at the expense of 4-, 5-, 6- and 7-speed units. 4

7 2. AVAILABILITY AND DEMAND BY INDEX RATING Market Share by Index Rating < The mpg ( L/100km) index range was the largest category every year since the inception of the FEI, except 2014 when it was outpaced by vehicles in the mpg ( L/100km) range. % LV Sales Rated 25 MPG and Higher 100% % 60% 40% 20% 0% Q MPG+ Less Than 25 MPG Forty-six percent of LVs sold in 2014 scored 25 mpg (9.4 L/100 km) or higher compared to 16.9% in the FEI base period, Q

8 The charts below compare the sales market share of vehicles within a particular index range with the percentage of all models available in the market that are rated within the same range. The charts illustrate directional change in the interaction between consumer preference (% market share) and manufacturer offerings over time. Less Than 15 MPG IBP % Sales % Models Offered While 2.2% of models offered by manufacturers were rated below 15 mpg (15.7 L/100 km), these vehicles accounted for only 0.3% of 2014 indexed sales. In 2008, 4.0% of indexed models fell in this range, and market share was 1.5%. 15 to 19.9 MPG IBP % Sales % Models Offered Vehicles in the 15 to 19.9 mpg ( L/100 km) range had a 23.1% market share, down slightly from 23.4% in Consumer interest in these vehicles has held fairly steady over the last couple years although availability continued a downward trend, falling to 20.5% in 2014 from 23.6% in As a result, vehicles in this range achieved a market share above the % Models Offered for the first time. 6

9 20 to 24.9 MPG IBP % Sales % Models Offered This was the most popular FEI range in the previous years of the index. Light vehicles in the 20 to 24.9 mpg ( L/100 km) range accounted for 30.3% of sales in The gap between market share and availability was largest in 2014, with 34.6% of models falling into this range. 25 to 29.9 MPG IBP % Sales % Models Offered LVs rated 25 to 29.9 mpg ( L/100 km) covered 30.4% of sales, making it the most popular range on the index for the first year. The number of models offered in this range has more than doubled from 2008, but at 22.2%, is still well behind the 20 to 24.9 mpg ( L/100 km) range s 34.6%. Market share has been consistently above the percent available, showing that consumers are finding vehicles with the features they want while benefitting from relatively high fuel economy. 7

10 30 to 39.9 MPG IBP % Sales % Models Offered LVs rated 30 to 39.9 mpg ( L/100km) grabbed a 12.8% share, versus 1% in 2013 and 2.3% in Market share increased 445% in 6 years, with the second-fastest range, 40 mpg (5.9 L/100 km) and up, growing just over 100%. Availability in this range has more than tripled over the index timeframe, reaching 11.4% in A greater selection of hybrids helped the growth in this section, but a bigger impact came from small, standard gas-powered cars making their way into this section of the market. 40 MPG and Higher IBP % Sales % Models Offered LVs rated 40 mpg (5.9 L/100km) or higher accounted for 3.1% of sales, down slightly from 2013 s 3.4%. From 2008 to 2014, the number of models has increased 6-fold, while market share has only doubled. 8

11 Market Share FEI Yr/Yr % Chg. WARDSAUTO FUEL ECONOMY INDEX: STATE OF THE INDUSTRY 3. FUEL ECONOMY BY VEHICLE TYPE &SEGMENT Market Share by Vehicle Type 100% 75% % 4% 50% 3% 2% 25% 0% Q (IBP) Car Light Truck FEI % Chg. 1% 0% Light trucks accounted for 52.6% of 2014 indexed sales, above cars for the second consecutive year. The rating for cars improved 2.9% to 29.2 mpg (8.1 L/100 km) and light trucks rose 2.8% to 21.1 mpg (11.2 L/100 km), with the shift to the lower-rated vehicle type slowing growth of the overall light vehicle market to 2.2%, compared with 2.3% the prior year. All eight WardsAuto market segments exceeded previous index highs in WardsAuto Fuel Economy Index Rating By Vehicle Type and Segment: Base Period 2014 Segment Base Small Car Middle Car Large Car Luxury Car Total Car Cross Utility Sport Utility Van Pickup Total Light Truck Industry Total CARS 9

12 Cars BASE FEI Rating (MPG) Yr/Yr % Chg. 1.8% 2.2% 1.3% 2.4% 4.9% 3.5% 2.9% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% % All car segments lost share in 2014, but still positively impacted the index with record FEI ratings. The average rating for cars in 2014, 29.2 mpg (8.1 L/100 km), was 2.9% above the prior year and 20.6% higher than the base period. Small Car Segment Base WardsAuto FEI % of Sales Small cars scored 31.1 mpg (7.6 L/100 km), up 3.0% from prior-year. The segment accounted for 18.8% of LV deliveries, down from 19.3% in This is the only segment above 30 mpg (7.8 L/100 km), but it has been losing market share since

13 Midsize Car Segment Base WardsAuto FEI % of Sales Midsize cars, the least improved segment in 2014, registered a 2.1% index bump to 29.6 mpg (7.9 L/100 km). The segment accounted for 18.9% of LV sales, down from 19.8% in The steep drop in market share brought this segment nearly equal to small cars in Large Car Segment Base WardsAuto FEI % of Sales Large cars achieved 21.9 mpg (10.7 L/100 km), while taking a 2.2% share of indexed sales, down from 2.6% in This segment has the lowest FEI rating, but also has the smallest market share. 11

14 Luxury Car Segment Base WardsAuto FEI % of Sales Luxury car sales accounted for 7.6% of Index-tracked sales and reached 25.6 mpg (9.2 L/100 km). The 4.5% rating increase from prior-year makes this the most improved segment. The rating for luxury cars was greater than the light-vehicle average for the first year in LIGHT TRUCKS Light Trucks BASE FEI Rating (MPG) Yr/Yr % Chg. 1.7% 4.7% 2.6% 1.5% 2.0% 1.5% 2.8% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% % Light trucks, including traditional truck segments (sport utility vehicles, vans, pickups) as well as cross/utility vehicles, scored a 21.1 mpg (11.1 L/100 km) index rating, up 2.8% from 2013 and 18.5% above Q

15 Cross/Utility Segment Base WardsAuto FEI % of Sales Cross/utility-vehicles (CUVs) comprised the largest market segment for the sixth consecutive year, making up a segment-record 27.3% of deliveries. CUVs sold in 2014 averaged 23.3 mpg (10.1 L/100 km), a 2.6% improvement over CUVs are the best rated light truck segment and score higher than large cars. Sport Utility Segment Base WardsAuto FEI % of Sales SUVs grabbed 7.2% share of LV sales, up from 6.8% in The segment s index rating rose 2.3% to 18.1 mpg (13.0 L/100 km). 13

16 Pickup Segment Base WardsAuto FEI % of Sales Light-duty pickups improved 2.4% to 17.2 mpg (13.7 L/100 km), but remained the lowest-rated segment on the index, while accounting for 12.6% of 2014 index sales. Over the 7-year index period, pickups are the slowest growing light-truck segment. Van Segment Base WardsAuto FEI % of Sales Vans sales accounted for 5.6% of Index-tracked sales and recorded a 2.4% increase on the FEI to 21.0 mpg (11.2 L/100 km). 14

17 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 WARDSAUTO FUEL ECONOMY INDEX: STATE OF THE INDUSTRY 4. FUEL ECONOMY AND FUEL COSTS Fuel Economy Index vs Price of Gasoline $5.00 $4.00 $3.00 $2.00 $1.00 $0 WardsAuto FEI (MPG) Avg Gasoline Price ($/Gal) The chart above shows the monthly WardsAuto FEI rating for the industry as a whole versus the average price of a gallon of gasoline (all grades, including taxes) as reported by the U.S. Energy Information Administration (EIA), and demonstrates strong directional correlation between the FEI and gasoline prices over time. At the start of 2008, rising gas prices, culminating in July s record $4.11 average price per gallon, spurred a steep increase in the FEI rating. After a dramatic decline in fuel prices over the final months of 2008, accompanied by a slightly less drastic decline in fuel economy, the FEI and average gas prices trended upward along similar paths, with fluctuations in fuel economy generally mirroring changes in fuel cost. 15

18 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 WARDSAUTO FUEL ECONOMY INDEX: STATE OF THE INDUSTRY Fuel Economy Index vs Price of Gasoline $5.00 $4.00 $3.00 $2.00 $ $0 WardsAuto FEI (MPG) 3-mo avg Avg Gasoline Price ($/Gal) 3-mo avg This graph shows the rolling 3-month average of the index results and gas prices. Smoothing out the lines makes the relationship easier to see, as fluctuations in economic factors and gas prices are rounded out. There is major drop in gas prices at the end 2014, but the index rating doesn t follow that downward trend. As 2015 models saturated the market, the improved fuel economy ratings on many models kept the average from slipping. Using the model-year 2014 mpg-ratings for the whole year and assuming shoppers would have selected the same vehicles, we would see the expected drop in the index rating at the end of the year. Assuming No Model-Year Improvements Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec WFEI WFEI (No MY Chg) Avg Gasoline Price ($/Gal) 16

19 Average Gasoline Cost / 100 Miles Driven $18.00 $16.00 $14.00 $12.00 $10 $8.00 $6.00 $4.00 $2.00 $0 $15.56 $15.96 $15.93 $12.89 $15.28 $14.38 $ $ (gas)/ 100 miles (gas vehicles only) Average After a dip in 2009, the cost per 100 miles for a standard gas-powered vehicle increased, up over $15 for a 3-year stretch. In 2014, the cost dropped down to $14.38, just below the 7-average. 5. FUEL ECONOMY BY POWER TYPE The above graph shows the share of Index-tracked light vehicle sales, with the numbers in parentheses showing the change from Despite the progress on alternative power sources in the last decade, gas-powered vehicles remain a strong favorite. In 2014, hybrid models lost market share to gas models. Alternative power-types, which together accounted for 5.6% of sales, effectively lifted the industry rating from 23.9 mpg (10 L/100 km), without those vehicles, to 25.0 mpg (9.4 L/100 km) including those vehicles. 17

20 FEI Rating (MPG) % of Sales WARDSAUTO FUEL ECONOMY INDEX: STATE OF THE INDUSTRY The index rating for alternative power types, as a group, increased 4.2%, while gasoline-only models improved only 2.4%. WardsAuto Fuel Economy Index Rating By Power Type: IBP 2014 Q Gas Diesel Hybrid (HEV) Plug-in Hybrid (PHEV) Electric (EV) Fuel Cell Industry Total Gasoline FEI Rating (MPG) % of Sales Gasoline-only-powered vehicles made up 94.4% of all index sales, up from 2013 s 94.0% result, the first market share increase in four years. The average FEI score for gas-powered vehicles rose 16.9% from IBP to 23.9 mpg (9.8 L/100 km). Never below 94% on the market, gas-powered vehicles are the dominant power type for U.S. vehicles, and index gains are closely tied with improvements within this segment. 18

21 FEI Rating (MPG) % of Sales FEI Rating (MPG) % of Sales WARDSAUTO FUEL ECONOMY INDEX: STATE OF THE INDUSTRY Diesel FEI Rating (MPG) % of Sales Diesel-powered vehicles averaged 30.9 mpg (7.6 L/100 km), down 0.5% from Market share was down slightly, from 2.1% in 2013 to 2.0% in The index rating fluctuates over time, based on the specific mix of vehicles each year. Market share movements follow gasoline price changes. Hybrid FEI Rating (MPG) % of Sales Hybrid vehicles on the index averaged 43.7 mpg (5.4 L/100 km), up 0.3% from 2013, and 11.0% from the IBP. As fuel economy for this power type has been mostly flat for three years and fuel prices became relatively low, hybrids lost market share in 2014, accounting for 2.8% of all LV sales, down from 3.2% the previous year. Hybrids are the only electrified power type to not have consistent growth in market share. 19

22 FEI Rating (MPG) % of Sales FEI Rating (MPG) % of Sales WARDSAUTO FUEL ECONOMY INDEX: STATE OF THE INDUSTRY Plug-in Hybrid FEI Rating (MPG) % of Sales 0 Plug-in hybrids (PHEVs) maintained a 0.3% market share from prior-year, although the number of models available increased from six to nine. The power-type s FEI rating reached 56.2 mpg (4.2 L/100 km), 0.5% above Electric FEI Rating (MPG) % of Sales Electric vehicles became more popular than plug-in hybrids in 2014, accounting for 0.4% of sales, compared to 0.3% the prior year. More models, lower price tags and public acceptance allows market share to keep rising. EVs had an industry-leading FEI rating of mpg (2.1 L/100 km), up 4.0% from mpg (2.2 L/100 km) in Fuel Cell Vehicles (FCVs) continue to make news and garner manufacturer R&D dollars, but lack of fueling infrastructure and high equipment costs continue to reign in development. Fuel Cell vehicles have a 74 mpg (3.2 L/100 km) FEI rating, but only 2 FCV sales were reported in 2014, providing a statistically negligible impact on the overall index. 20

23 In this chart, a circle s area represents a segment s relative market share and position on the graph indicates its FEI rating in mpg. The blue circles reflect the continued market dominance - and rise in efficiency - of gas-powered vehicles. Note the small but growing EV segment, high above the rest of the market. This chart, which excludes gas vehicles, illustrates the changing market for alternative-power vehicles. EVs, while small, represent the fastest growing power type, while earning dramatically higher FEI ratings. 6. HEV V. GAS-POWERED VARIANTS: PENETRATION, COST & FUEL ECONOMY 21

24 Segment Hybrid Price Premium % Hybrid Preference Hybrid FEI Improvement Small Car 20.6% 1.6% 51.8% Middle Car 6.8% 6.1% 44.0% Luxury Car 6.7% 8.1% 34.6% Based on model lines offering HEV and gas-powered variants. Only HEVs and gas models included in comparison. HEV market share was 17% higher in 2014 than in the IBP, while the number of hybrid models available has nearly quadrupled. The price gap between hybrid models and their gas counterparts is narrowing, but it is still a significant factor in the slow growth of hybrid sales. Sales of HEV and gas-powered variants of car models that offer both variants show a difference in the importance of vehicle price and fuel economy, depending on the market segment. HEV variants of small cars, on average, were priced 20.6% higher than the average price of gas-powered trim levels of the same model. Of small cars with hybrid and gas options, hybrids made up just 1.6% of sales, despite an average efficiency boost of 51.8%. Consumers in this segment tend to be the most price-sensitive auto buyers, making the price differential a bigger hurdle for consumers in this segment. Additionally, gas-powered vehicles in this segment are perceived as very efficient and score well above the industry average on the FEI, perhaps diminishing the perceived benefit of moving to an HEV. The price difference between hybrid and gas-powered models of midsize cars is less than that of small cars, while the hybrid models are nearly four times as popular. This segment has a 44.0% better fuel economy rating with a hybrid powertrain. Luxury car buyers opted for HEV variants the most, 8.1% of the time. The cost and fuel economy differentials are low on average, but vary widely among models in this group as these lineups offer many options to fit specific demands. 22

25 7. HYBRID AND ELECTRIC VEHICLE PENETRATION 7.1 HYBRID & ELECTRIC VEHICLE REGISTRATIONS BY STATE Hybrid and Electric New LV Registration by State 2013 % 2014 % 2013 % 2014 % Alabama 2.0% 1.4% Montana 2.7% 2.0% Alaska 1.8% 1.2% Nebraska 2.2% 1.9% Arizona 4.1% 2.8% Nevada 3.4% 2.5% Arkansas 2.1% 1.4% New Hampshire 3.2% 2.3% California 8.7% 7.8% New Jersey 2.4% 2.0% Colorado 3.6% 2.7% New Mexico 3.1% 2.1% Connecticut 3.2% 2.5% New York 2.8% 2.4% Delaware 3.3% 2.4% North Carolina 3.8% 2.7% Dist. Of Columbia 6.8% 6.2% North Dakota 1.0% 0.8% Florida 3.2% 2.3% Ohio 2.4% 1.8% Georgia 3.8% 2.9% Oklahoma 2.1% 0.9% Hawaii 6.6% 5.2% Oregon 6.9% 5.8% Idaho 3.3% 2.3% Pennsylvania 2.5% 1.9% Illinois 3.5% 2.8% Rhode Island 2.9% 2.2% Indiana 3.0% 2.3% South Carolina 2.9% 2.1% Iowa 2.6% 1.9% South Dakota 1.7% 1.2% Kansas 3.3% 2.3% Tennessee 2.7% 2.1% Kentucky 2.8% 2.1% Texas 2.1% 1.5% Louisiana 1.2% 0.9% Utah 3.3% 2.7% Maine 3.6% 2.6% Vermont 3.9% 3.0% Maryland 3.9% 3.0% Virginia 4.1% 3.1% Massachusetts 3.6% 3.0% Washington 7.1% 5.5% Michigan 2.5% 1.6% West Virginia 1.7% 1.1% Minnesota 3.1% 2.1% Wisconsin 3.0% 2.3% Mississippi 1.6% 1.2% Wyoming 1.6% 1.2% Missouri 2.8% 1.7% Grand Total 3.7% 2.9% Source: Experian Automotive Hybrid and electric vehicles accounted for 2.9% of all model-year 14 light vehicle registrations. The adoption rate of alternative-powered vehicles continued to vary widely from state to state. California s 7.8% electrified-vehicle share led all states. Second was District of Columbia s 6.2% penetration rate, followed by Oregon at 5.8%. States with the highest rates offer a variety of incentives such as tax credits, reduced license and registration fees, purchase rebates, home charging rebates, insurance discounts, single occupancy HOV lane access, and free metered parking. 23

26 7.2 BATTERY ELECTRIC VEHICLE (BEV) PENETRATION IN ZEV AND NON-ZEV STATES Battery Electric Vehicles Per 10,000 New Vehicle Registrations California 69.2 New Jersey 3.6 Connecticut 5.0 New York 3.6 Maine 5.2 Oregon 41.6 Maryland 6.9 Rhode Island 3.2 Massachusetts 6.5 Vermont 5.1 All ZEV States 32.1 ZEV States (Excl. CA) 6.7 All Other States 6.2 Source: Experian Automotive The above table looks only at the penetration of battery-only electric vehicles (BEVs) - not hybrids, plugin hybrids (PHEVs) or other vehicles that may qualify under the current ZEV guidelines. Nine states have adopted California s ZEV mandate. The EV penetration of states with a ZEV program (i.e., all 10 ZEV states combined) is over 5-times that of non-zev states. However, California s size and high BEV penetration rate play an outsized role on the ZEV states average. Excluding California, the electric vehicle registration figure becomes much closer to that of other states. Georgia does not have the ZEV mandate, but generous tax credits for electrics and carpool lane access in the greater Atlanta region brought 2014 retail sales of those vehicles to about 9,960. Despite the success, Georgia ended its tax credit program in July Washington has not adopted the ZEV mandate, but has a favorable climate and large high-income, tech savvy, environmentally active population areas, helping it to reach a higher than average level of 34.6 EVs/10,000 vehicle registrations. 24

27 8. CAFE PERFORMANCE INDEX MEASURING PROGRESS TOWARD FUTURE STANDARDS The WardsAuto CAFE Performance Index (CPI) was designed to show current model-year fuel economy in relation to the CAFE targets. Unlike the FEI, this index tracks only model-year production for the U.S. market, factoring in vehicle size and footprint and uses unadjusted (not window-sticker) city-highway combined fuel economy ratings. Data suggests that the EPA and NHTSA standards effectively task the automotive industry with achieving fuel economy improvement well ahead of market demands. The following chart shows the difference between the 2014 average and the CAFE standards set for 2021 and Improvement Required for CAFE Standards Small Car 20% 44% Cross Utility 36% 64% Midsize Car 20% 44% Sport Utility 46% 75% Large Car 48% 77% Van 29% 56% Luxury Car 41% 70% Pickup 26% 52% Car Total 25% 50% Truck Total 34% 61% All Light vehicles 30% 57% The 5-year average annual growth rate for the FEI is 2.3%. Using that as a baseline for the change in the CPI, the market average will increase approximately 28% from 2014 to 2025, half of the necessary 57% improvement. The average annual rate will need to increase to 4.2% to meet the 2025 figure. The following graphs show the actual CPI result for 2014 with the corresponding goals 2021 and 2021 based on the current vehicle size mix. Car CAFE Ratings/Standards Small Car Midsize Car Large Car Luxury Car

28 Small cars and midsize cars are both 44% away from their 2025 targets. For 2014, small cars averaged 4 mpg (5.9 L/100 km), and midsize cars rated 37.2 mpg (6.3 L/100 km). Large cars require a 77% gain on their 28.0 mpg (8.4 L/100 km) 2014 average, but are a low concern for automakers as they accounted for only 2.4% of CPI-tracked vehicles. Luxury cars, averaging 31.0 mpg (7.6 L/100 km), need to improve 70% to meet their 2025 standard. Light-Truck CAFE Ratings/Standards CUVs rated 29.8 mpg (7.9 L/100 km) and require a 64% improvement. SUVs, scoring 23.6 mpg (1 L/100 km), need the most development of the truck segments, 75%. Vans hit a 24.9 mpg (9.4 L/100 km) rating that is 56% away from the 2025 goal. Pickup trucks are the lowest rated segment at 22.3 mpg (10.5 L/100 km), but based on their footprint need to improve only 52% Cross Utility Sport Utility Van Pickup

29 9. 14 MODEL YEAR POWERTRAIN PROFILE This section highlights powertrain trends that have impacted the WardsAuto Fuel Economy Index. The data comes from WardsAuto annual engine and transmission factory-installation reports, which are an input to the index. However, the installation reports encompass all LVs, including those excluded from the WardsAuto Fuel Economy Index (see methodology). 9.1 ENGINES The use of smaller displacement engines remains on an upward trajectory as U.S. consumers become more accepting of engines with fewer than six or eight cylinders. Four cylinder engines alone powered 52.2% of U.S. LVs in model year 14, marking a single-year increase of 2.2 percentage points from 13, when it became the leading power unit for the first time in more than 80 years. Use of these engines has risen dramatically in just six years, from just 35.2% in model year 08. The four s rise came largely at the expense of 5- and 6-cylinder engines, that fell to a collective 32.5% in 14 from the previous year s 34.3%. V-8 use slipped only slightly, to 15.0% from 15.5% in 13, due in mostly to resurgent demand for larger pickups and SUVs. Among cars, the 4-cylinder rise was even more dramatic. Four-cylinder engines powered 77.9% of 14- model cars, up 3.1 percentage points from 74.8% the previous year and 56.2% in 08. Having already been eliminated from the light-truck field, the 5-cylinder engine powered just 1.3% of 14-model cars, down from 3.8% in 13, as more manufacturers shifted to high-tech fours. Reintroduced a year earlier, the 3-cylinder engine made further, albeit small, inroads in the car market in 14, rising to 0.3% from 0.1% in 13, with additional gains seen in 15. Engines with a displacement of 2.0L or less accounted for a record 13.7% of domestic-make LV, up from 12.4% in 13 and a 10-year average of 8.9%. 9.2 TRANSMISSIONS The migration to automatic and automated manual transmissions appears to have reached a plateau, at least temporarily, in 14, although there were significant changes in usage among various types of automatics. Overall, 95.0% of 14-model LVs featured an automatic gearbox, virtually the same of the prior year s 94.9% rate. 27

30 However, continuously variable transmission use rose sharply to 12.1% in 14 from 9.6% in 13, while the 8-speed automatic nearly doubled its share to 7.9% from 4.0% and the newly introduced 9-speed unit garnered a 0.9%. Those gains came at the expense of 4-, 5-, 6- and 7-speed units, all of which fell in 14, especially the 4- speed, that experienced a decline to 2.0%, or less than half the previous year s 4.5% rate. Although the 6-speed automatic remained the dominate transmission, its usage slipped to 61.1% from the record 63.7% achieved in 13. Use of the 7-speed automatic fell for the third consecutive year, to 2.6% in 14 from 3.1% the year before and 4.1% in 12. The all-time high was the 4.3% in model year 11. At 8.3% in 14 vs. 1% in 13 and 17.8% in 12, the 5-speed is expected to soon follow the 4-speed into oblivion as sophisticated electronic controls allow for an effective increase in the number of gear ratios to meet fuel economy demands. 9.3 TURBOCHARGING The rising tide of smaller displacement engines in U.S. light vehicles lifted the installation rate of turbocharged gasoline engines to a record 16.7% in 14 from 14.6% in 13. Turbo use in light trucks appeared to suffer a setback in 14, dipping to 14.6% from 16.0% in 13, but the decline had more to do with staggered new-model intros than with buyer dissatisfaction, and a comeback is seen in 15. Turbocharged gas engines became significantly more popular among car shoppers, achieving a record 19.4% penetration rate, up from the prior high of 13.1% in the 13 model year. Other turbocharged engine changes of note include: Model year 14 marked the fifth consecutive annual increase in the use of LV turbocharged gasoline engines, from just 2.8% in 10. Turbo use in domestic-built LVs was a record 12.7%, beating the prior record of 11.1%, set in 13. Compared with prior year s 3.4%, import installations climbed to 4.1% in 14. Turbocharged diesel engine use slipped to 3.9% from 4.3% the previous year, but is expected to register a significant gain in 15 as more light-trucks make the engine available. 28

31 WARDSAUTO FUEL ECONOMY INDEX: METHODOLOGY WardsAuto Fuel Economy Index (FEI) is designed to show directional change in the fuel economy of new light vehicles (LVs) sold in the U.S., and to offer comparative views of LV fuel economy across models, brands, segments and time periods. FEI ratings are derived by calculating average fuel economy for each LV model tracked by the Index, using annual installation rates of engine variants for each model and the corresponding EPA-published combined city/highway combined window-sticker fuel-economy ratings to weight monthly sales of each vehicle. Weighted model-line sales for segments, brands and other groupings of LV sales - for any given time period - are summed for the entire period and divided by actual unit volume sales to arrive at the corresponding average fuel economy rating for the grouping and/or time period. The arithmetic mean, (rather than the harmonic mean used by regulators to calculate corporate average fuel economy [CAFE]) is used in order to capture small changes in consumer adoption of advanced technologies. The Index uses monthly U.S. Light Vehicle sales and annual Model Year Engine Installation rates as reported by WardsAuto, and uses WardsAuto segmentation definitions. Pickup trucks and cargo vans with a gross vehicle weight rating (GVWR) over 8,500 lbs. and passenger vehicles, such as SUVs and passenger vans, with GVWR of 10,000 lbs. or more are not included in the published EPA fuel economy guide, and are thus excluded from the index. The U.S. government uses two different sets of numbers to describe vehicle fuel economy. One method, used by EPA, provides the city, highway and combined city/highway numbers that appear on new vehicle labels. There are separate regulations governing the test methods and procedures used to determine the fuel economy values under the Corporate Average Fuel Economy (CAFE) and greenhouse gas programs. Typically, the EPA label value is about 20 percent lower than the CAFE number. Sample EPA vehicle window-sticker. EPA changed its label calculation methodology in Data in this report reflects the adjusted values. Vehicle EPA ratings are updated each model year in September and again in March, and an algorithm is applied to calculate sales mix between current and prior model-year vehicles during the fourth quarter of each year, except where more precise sales information is available. 29