While riding around in our cars, it’s always beneficial to sit back and look at the entire landscape – horizon to horizon. It can also be quite interesting in a business setting as well. No one has a crystal ball (even the Magic 8-Ball comes up “Maybe” at times) but there are plenty of things to see that make you go “hmm.”
Readers will remember we reported on the 2022 Camaro’s production at the Lansing Grand River plant had been postponed to some time in September. There is plenty of reading about how the recent chip shortage has forced auto manufacturers to pick and choose which of their children is the first to get the oxygen mask during the world’s recent loss of cabin pressure, so to speak.
If you follow that thought to the very tips where dollars and sense meet, you’ll understand why the OEMs would divert those precious conductors to the most profitable, highest capacity lines when possible. But, much like an opportunity to pass that narcissistic slow-poke after 20 miles in the fast lane, you always need to watch for the speed cameras hiding somewhere.
In this case, what are the chances the current throttling back of certain models may be due to CAFE requirements and not strictly a loss for silicon chips? The concept of the .gov’s Corporate Average Fuel Economy (CAFE) standard, which is calculated by a production-weighted average across a manufacturer’s fleet, is to get consumers into more fuel-efficient vehicles by encouraging the OEMs to build and sell more of them. The deciding factor being the cost savings by doing so. OEMs don’t have to meet CAFE numbers, but not doing so will carry a weighty fine for each vehicle sold.
Note the OEMs are currently under CAFE regulations passed in 2007, which mandated that new cars, SUVs, and light trucks together average 35 mpg, beginning in 2020. This was an increase of 40% from the previous 25 mpg average they needed to hit just a few years ago. Looking ahead, in just four short years, the CAFE standard will again jump to 54.5 mpg in 2025. Also, in 2021, the law allows the National Highway Traffic Safety Administration (NHTSA) to issue additional requirements for cars and trucks based on the footprint (size) of the vehicle or other mathematical standards. What does that have to do with production? Reportedly, for every Mustang Mach-E (electric, four-door “Mustang” SUV) the Blue Oval sells, they can produce TWO Shelby Mustang GT500s and abide within CAFE standards.
Putting that inside the GM box (or the new one that constantly reminds us of the Goodwill logo), you need to ask, “What E-vehicle does GM have to counter all the trucks they’ve been building lately?” GM has been doing a lot of talk about going all-electric, but the fact remains the bulk of fending off CAFE regs and making room for fuel-happy cars falls on the Chevy Bolt EV. How many of those have you seen on the road? You’ve likely seen more Mach-Es, and the Bolt EV has been in production since 2017.
As mentioned, GM is going all-in on electric and alternatively-powered vehicles, which will greatly aid against those always-increasing fuel target numbers. Some GM EVs are planned to come online as soon as next year. But until then, it would make sense if GM throttled back on their building of higher-horsepower, but lower-demand cars to help skew the slope into a little greener pasture. It’s been known that trucks have been a great profit-maker for GM, and it would make sense to divert the necessary semiconductors to continue making money. Diverting production from less profit-heavy models with equal CAFE burden keeps from costing the corporation money. We’re sure GM’s numbers crunchers know exactly where the profitability bar stands throughout the entire product line and we wouldn’t be surprised if they’re sitting there, oxygen mask in hand, considering which brand and model gets the next sniff to keep it going.