Sales of Bigger Cars Will Force Manufacturers to Stress More Fuel-Efficient Ones

Falling gas prices last year were correlated with increased sales of gas-guzzling SUVs and a softening in demand for hybrids like Toyota’s Prius—resulting in a dip in the average fuel efficiency of vehicles sold at the end of the year.

Last August—before the big plunge in oil prices—average consumption of all U.S. passenger vehicles sold in that month was 25.8 miles per gallon. In December, that had dipped to 25.1 miles per gallon, in large part because of a strong sales shift toward SUVs and other vehicles that get poor gas mileage.

That comes against a larger trend of rising fuel efficiency overall in the past several years—from 20.8 miles per gallon for model year 2008 vehicles to 25.3 miles per gallon for model year 2014 vehicles, according to the University of Michigan Transportation Research Institute.

The dip due to cheaper gas could, however, be buffered somewhat by federal regulations for fuel efficiencies. U.S. carmakers are governed by regulations called “corporate average fuel efficiency standards” that set the average fuel economy that carmakers must achieve in two classes of vehicle: cars and light trucks, which include popular SUVs. When sales of gas-guzzling vehicles grow, carmakers must balance that out with higher sales of lower-consuming vehicles to keep the average on track.

One way to do that is to push out SUVs that have relatively smaller engines. For example, faced with a surge in interest in Sierra SUVs or Silverado pickup trucks, GM will now manufacture—then more-aggressively market—versions that have smaller engine displacements, says Darin Gesse, marketing product manager for GM’s electric car, the Chevy Volt. The Sierra and Silverado come with an eight-cylinder version that gets 19 miles per gallon, and a six-cylinder version that gets 20 miles per gallon.

For the same reason that the auto industry will be motivated to push out more-efficient versions of light trucks and SUVs, the industry will be increasingly pressured in 2015 to hawk smaller versions of cars, as well as hybrids and electrics, tending to build market share and technology advances for those cars, too, Gesse says.