Self-driving cars are going to be the future.
It’s inevitable, really.
They offer everything. Safer. More efficient. Etc.
The thing is though, they’re going to be the “car of the future” for a long, long time.
It’s not going to be 2020 (which is only four years away now). Or 2030. Maybe 2040 they’ll be the standard.
Not even close.
That’s why we’re looking at the car of the immediate future and the obscure, poorly-understood government mandate which practically guarantees it’s explosive growth in the years ahead.
Meet The Car Of The Immediate Future
Let me take you back to 1973.
OPEC’s oil embargo sent oil and gas prices soaring.
The government response was as immense, feckless, and destructive.
Thankfully, the price controls and the rationing and gas lines they created (there weren’t any gas shortages when it was $4 a gallon because oil companies were working overtime to get it to you at that price).
Many vestiges still remain.
A national speed limit and daylight savings time changes are a couple of the smaller ones.
The biggest, most impactful, and on the verge of creating a massive change (and opportunity!) is the Corporate Average Fuel Economy (CAFE) standards.
You may have heard of the CAFE standards before.
They seem simple.
Just require automakers to make all its cars with an average fuel economy of a certain number of miles per gallon (mpg).
Voila. Problem solved.
In reality though, it’s not nearly so simple. And that’s where an upcoming increase to CAFE standards to lead to even massive changes in the auto industry.
Here’s how big.
The CAFE standard was 27.5 mpg from 1992 through 2010.
It was raised to to 35.5 mpg in 2010.
A sizeable leap, but manageable. There was a lot of “low hanging fruit” to make autos more efficient.
Over the last few years we’ve seen a lot more turbo and superchargers, higher compression ratios, the replacement of metal body panels with plastic and aluminum.
All relatively small, simple fixes. Most a bit more expensive. But it was all doable.
The next jump in CAFE standards though is much bigger.
The CAFE standards will require an average 54.5 mpg in 2025.
It’s a huge requirement. To any onlooker, it’s probably an impossible standard.
That’s where things get tricky and the opportunity is created.
Details, Details, Details
You see, CAFE standards aren’t calculated how you would assume they would.
If you read a review in Car and Driver of Honda Accord it may say, “We drove it for 22,000 miles and average 31 mpg.”
The CAFE calculations aren’t based on that or something similar though.
They’re based on emissions.
So the only way to get to that high standard will be with electric and hybrid vehicles with no or little emissions. Millions of them.
This is no accident. Electric vehicles are afforded extra special treatment under CAFE standards.
Starting for model year 2017 (which you’ll see hitting showrooms in a few months), the fully electric vehicles will be counted double in the CAFE standards.
Hybrid electric vehicles with both electric and gas powered engines will be counted 1.6 times more than they would otherwise.
This is all why BMW, Mercedes, and every other major automaker is rolling out fully electric or hybrid vehicles in the next year or two.
They must meet the CAFE standard to sell cars in the United States.
Picks And Shovels
This is all going to be a big change in the auto market.
Some estimates peg the required production of electric vehicles to be one third to one half of the nearly 20 million vehicles produced in the U.S. each year.
And efforts in Europe and China where the emission standards are even higher will propel even more sales of these types of cars.
The common element -- and where some big money is seeing opportunity -- is the exponential growth in battery supply required to meet these government mandates.
Next time we get together, we’ll look specifically how to go along for a ride on that and why the time to get in on it is closing fast.