CAFE Fines Repealed

[Ron Texas]

This week fines for failing to hit prescribed fuel efficiency standards were repealed. Tesla sold credits (at a discount) to offset these fines to other automakers in the US. Their revenue was $1.6 billion last year, which is substantial.

Models, engines and options which increased these fines were likely priced to include the fine. That may account for the very high price of the 392 and XR packages.

What's going to happen next? Will we finally see a 5.7 Wrangler for $2k more than a V6 Automatic?

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[roaniecowpony]

...

What's going to happen next? Will we finally see a 5.7 Wrangler for $2k more than a V6 Automatic?

Not likely.

 

[Ron Texas]

Not likely.

Party Pooper.

 

[GabeBoyTheGreat]

Models, engines and options which increased these fines were likely priced to include the fine. That may account for the very high price of the 392 and XR packages.

Maybe to a certain extent, but most of the bloated cost is coming directly from Stellantis. I have 3 data points to back this up.

1st data point: the CAFE fine is $14 per 0.1 MPG under the standard. For the sake of simplicity, let's say the standard for the 392 was 50 MPG (in reality, it would be lower due to the size of the vehicle, so this is a worst case calculation). That would mean each 392 would cost $14 × 500 = $7,000. Yet the 392 MSRP Is around $40,000 more than a non-392 Rubi.

2nd data point: when the 392 was first released, it was around $80,000. The current edition is $20,000 more than that. The CAFE standard has not changed that drastically in that short amount of time.

3rd data point: when Ford was offering employee pricing earlier this year, the comparable model in terms of price and capability, the Bronco Raptor, was selling for over $20,000 BELOW the MSRP of around $100,000. That means that even selling the Raptor at $80,000 is still considered profitable for Ford, so the extra $20,000 is just a bonus for them.

That isn't me saying that the current CAFE standards aren't completely unrealistic and damaging to both consumers and auto makers. However, much of the "cost" of CAFE goes unseen, because it is baked into the engineering costs of the vehicle. Unlike CAFE fines, engineering costs per vehicle decrease for each additional vehicle sold, so that's why they have to sell more vehicles to make up for the additional engineering due to CAFE.

Perfect examples of these additional engineering costs would be ESS and FAD on the Wrangler, both of which are widely hated by owners.

So while reducing CAFE fines will inevitable lower the costs of vehicles, it will take time because vehicles that are already designed to meet the standard already have that cost built in. And the CAFE fines will do nothing to address these low-volume, high-performance, high-profit models. However, it MAY encourage more models that appeal to a lot of consumers, such as a 5.7l Wrangler or Gladiator.

 

[roaniecowpony]

Party Pooper.

Yeah. I went to look at what the cost difference was between a V6 Rubicon and a 392 was and it shocked me. It's right at $50k more, or almost twice as much.

 

[Ron Texas]

Yeah. I went to look at what the cost difference was between a V6 Rubicon and a 392 was and it shocked me. It's right at $50k more, or almost twice as much.

Are you taking into account other equipment differences like the XR upgrade? Yeah, it's sill a lot more than actual cost plus a $7k fine. I don't think that wrecks my thesis. Reintroduction of the Hemi to the RAM 1500 is possibly tied to the near certain change in law and not just the change in management.

A 5.7 has to cost less than a Hurricane I6. Maybe the Wagoner series will get it. At any rate I see less management resistance to a 5.7 Wrangler now. Pricing on the 392, as on everything, is what the market will bear. Perhaps they thought there would be more profit from limiting supply.

 

[Heimkehr]

I'd be tempted to trade my JLU for one with a 5.7L, but only if the latter is priced on this side of reality. I wouldn't object to a $5K line item option price, similar to how the 3.0L oil burner was sold.

A $5K buy-in is more than sufficient. The 5.7L Hemi is settled architecture. It's not the Second Coming. If Stellantis pulls the same get-rich crap with that engine as they did the 392, they can go hang.

 

[Odyssey USA]

I think you’ll see a 5.7 Wrangler by the 2027 model year when 5.7 production and supply stabilizes.

 

[GabeBoyTheGreat]

Side note, I would argue the XR package is actually a really great value. It is just disappointing that you can't get it with the 6MT.

For about $4,500, you get a small lift, 35" tires, 4.56 gears, bigger brakes, and a hinge gate reinforcement; plus, it is all covered under the factory warranty. To add these same upgrades to a stock Wrangler would cost about $10,000.

I think the difference between the XR package and the 392 in terms of price comes down to volume of sales. The XR package is reasonably priced because they know it will sell well and they WANT to sell a lot of them. They also know that they can sell the package at a bloated price because people will just have the upgrades installed aftermarket.

They treat the 392 as the "halo" model and don't necessarily care how many units they sell; they just want to maximize the profit margin per unit. They know people will pay the price because most people don't want to deal with the hassle/cost of an engine swap. It is just unfortunate for us peasants who don't have that level of disposable income.

Also, competition with the Bronco is a huge factor in pricing for both the XR package as well as the 392.

 

[azjl#3]

Maybe to a certain extent, but most of the bloated cost is coming directly from Stellantis. I have 3 data points to back this up.

1st data point: the CAFE fine is $14 per 0.1 MPG under the standard. For the sake of simplicity, let's say the standard for the 392 was 50 MPG (in reality, it would be lower due to the size of the vehicle, so this is a worst case calculation). That would mean each 392 would cost $14 × 500 = $7,000. Yet the 392 MSRP Is around $40,000 more than a non-392 Rubi.

2nd data point: when the 392 was first released, it was around $80,000. The current edition is $20,000 more than that. The CAFE standard has not changed that drastically in that short amount of time.

3rd data point: when Ford was offering employee pricing earlier this year, the comparable model in terms of price and capability, the Bronco Raptor, was selling for over $20,000 BELOW the MSRP of around $100,000. That means that even selling the Raptor at $80,000 is still considered profitable for Ford, so the extra $20,000 is just a bonus for them.

That isn't me saying that the current CAFE standards aren't completely unrealistic and damaging to both consumers and auto makers. However, much of the "cost" of CAFE goes unseen, because it is baked into the engineering costs of the vehicle. Unlike CAFE fines, engineering costs per vehicle decrease for each additional vehicle sold, so that's why they have to sell more vehicles to make up for the additional engineering due to CAFE.

Perfect examples of these additional engineering costs would be ESS and FAD on the Wrangler, both of which are widely hated by owners.

So while reducing CAFE fines will inevitable lower the costs of vehicles, it will take time because vehicles that are already designed to meet the standard already have that cost built in. And the CAFE fines will do nothing to address these low-volume, high-performance, high-profit models. However, it MAY encourage more models that appeal to a lot of consumers, such as a 5.7l Wrangler or Gladiator.

My 2 cents, has a car ever dropped in price, ever? Not in my 60 years. Even the recent sales slump, sure, discounts, but MSRP remained rock steady.

 

[GabeBoyTheGreat]

My 2 cents, has a car ever dropped in price, ever? Not in my 60 years. Even the recent sales slump, sure, discounts, but MSRP remained rock steady.

Actually, yes. I am sure there are other examples, but the Gladiator's MSRP was reduced for the 2025 models (w/ 8AT).

But to clarify my statements, I don't think the "price drop" would be reflected in a lower MSRP. Instead, I would expect the INCREASE in MSRP due to natural inflation to be less significant or even delayed. So maybe, instead of the MSRP typically increasing year after year, it would stay stagnant for a few years until inflation forces a price increase.

 

[Ron Texas]

My 2 cents, has a car ever dropped in price, ever? Not in my 60 years. Even the recent sales slump, sure, discounts, but MSRP remained rock steady.

Ford just reduced the price of the Raptor by $10,000. The Toyota Supra had a price reduction years ago. Sometimes the approach is to keep the base MSRP the same but make some options standard.

 

[GabeBoyTheGreat]

Ford just reduced the price of the Raptor by $10,000. The Toyota Supra had a price reduction years ago. Sometimes the approach is to keep the base MSRP the same but make some options standard.

I forgot the Dodge Viper had a price cut in 2015 of about $15k.

 

[Pape]

I have a feeling that you gain headroom on what tech will be in the vehicle, probably less wonky setup but I do not think any significant price reductions is at the agenda unless the consumer make their wallets talks

 

[Ron Texas]

ESS will either go away or have a permanent off switch.

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