Project Decaf, DSK (2013)
I would like to thank the following EMD-DSK Decaf team members for their excellent work and commitment to the project. The results were World Class!
Vinnoth Kanna, Shithanshu Mistry, Jeremy Faraud (Co-Leader), Cyril Noulette (Team Leader), Sudhanshu Pal.
The DeCAF project looked at how Jaguar, Land Rover and Tata could imagine low consumption, efficient, new market entry level vehicles, as well as allowing them to avoid CAFE fines, or simply put to “DeCAF” their current situation.
In 1975 the USA government started to enact fuel efficiency regulations for OEMs following on from the Arab oil Embargo. They wanted cars to consume less, hence making the USA less dependent on imported oil. There was also of course a positive environmental knock-on effect.
The CAFE regulation fined the OEMs if their Corporate Average Fuel Economy was above the target set for a particular year.
It covered all cars and light trucks of a particular manufacturer and was the average of all their vehicles together, so if an OEM produced 90% small vehicles which had a very low average fuel consumption (well under the CAFE requirement for that year) they could also produce 10% Gas-Guzzlers without the average being greatly effected or fines imposed.
The current fine is $5.50 for every 0.1 mpg under the standard, multiplied by the manufacturer's total production for the US market.
The fines started in the 1978 model year and the target mpg has increased yearly since. In 1978 for passenger cars it was 18 mpg and in 2011, 30.2 mpg.
As an example, if an OEM's 2011 CAFE is say 28.2 mpg instead of the required 30.2 mpg and the total US production for the year is 100,000 cars, the fine would be $5.50 x 20 x 100,000 or $11 million.
In 2006 Mercedes-Benz paid $30,257,920.00 in CAFE fines.
Some brands prefer to pay the fines because it is cheaper than developing more fuel-efficient engines.
However for companies such as Jaguar-Land Rover, that has a history of high consumption vehicles, because of big engines and 4x4, the situation is very difficult. Positioning themselves as premium brands, they do not have a multitude of low consumption vehicles to bring their average down and they depend on the important US market.
In 2011 they paid $14,439,425.00 in fines for 50,375 vehicles sold, or put in simple terms failed to reach the 2011 goal of 30.2 mpg by over 5 mpg, averaging around 25.2 mpg.