March 10, 2011

Dr. Jay Baron

President
Center for Automotive Research
1000 Victors Way, Suite 200
Ann Arbor, MI 48108

Dear Dr. Baron,

In December of last year, your organization put forward projections for the U.S. auto industry and
market in a presentation titled “The U.S. Auto Industry and the Market of 2025.” The
presentation concluded that the costs associated with future U.S. greenhouse gas and fuel
economy standards currently under consideration would far outweigh associated fuel savings, and
because of those rising costs, demand for new vehicles would decline and the U.S. automotive
industry would experience substantially reduced levels of production and employment. These
findings were circulated by the Alliance of Automobile Manufacturers to U.S. House and Senate
energy and oversight committees.

The International Council on Clean Transportation undertook a review of the presentation

because, like CAR, we believe strongly that public policy must be grounded in credible analysis.
Unfortunately, our review uncovered so many fundamental technical and scientific errors as to
make it clear that CAR’s analysis cannot, without significant correction and improvement, serve
as a basis for serious policy discussions. We describe the most egregious errors in this letter, and
provide the attached document for more detail.

The CAR presentation cites fuel consumption reductions from the 2010 National Academy of
Sciences (NAS) report “Assessment of Technologies for Improving Light Duty Vehicle Fuel
Economy” and treats them as fuel economy improvements, when these two measures are not
equivalent (e.g., a 30% reduction in fuel consumption equals a 43% increase in fuel economy). It
ignores the near certainty that automakers will take full advantage of air conditioning credits, and
thus lower the effective performance target by about 4–6 mpg. It assumes that new model year
2025 vehicles will be driven about 12,000 miles per year, when new cars today are driven many
more miles per year and NHTSA projects 17,000–19,000 mile per year in 2025. It assumes that
CAFE/laboratory fuel economy values will be achieved in the real world, ignoring the widespread
consensus that real world fuel economy is at least 20% lower than CAFE values. It includes the
projected costs of safety equipment that are not relevant to this analysis.

Moreover, the CAR presentation inappropriately uses estimates of current fuel consumption
technology benefits and costs from the NAS report to represent 2025 vehicles—despite the
report’s explicit warning that those estimates are for “technologies that are commercially

Drew Kodjak 1225 Eye Street, NW One Post Street 48 Rue de Stassart www.theicct.org
Executive Director Suite 900 Suite 2700 Bte 6
Washington DC 20005 San Francisco, CA 94104 1050 Brussels
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 Jay Baron, March 9, 2011, page 2

available and can be implemented within 5 years” (emphasis added). By employing near-term
projections as long-term estimates, against NAS’s own advice on defensible practice, CAR
ignores technology advances and cost reductions due to research and development and learning
that are universally expected to occur in the future. Because of these erroneous assumptions, the
CAR analysis also requires a much higher market share for hybrids, plug-in hybrids, and battery
electric vehicles, along with their associated charging equipment costs, which leads to much
higher vehicle technology costs.

The cumulative effect of all these errors is to dramatically overestimate the vehicle price and
significantly underestimate the fuel savings associated with potential greenhouse gas/CAFE
standards. Whereas CAR found that fuel savings over the first five years do not offset vehicle
price increases, correction of the analysis errors – and the use of technology benefits and costs
representative of 2025 – yield fuel savings for the first five years that far outweigh the increases
in vehicle price. In fact, just correcting the factual and mathematical errors in the report would
yield fuel savings over the first five years that are greater than the increases in vehicle price.

The bottom line is that if CAR had used a more credible analytical approach and representative
estimates for technology and cost, it would have found positive impacts on industry and projected
growth in US automobile sales, production, and employment.

In closing, we would like to clarify that our comments here and in the attached document do not
constitute what we would consider a robust counter-analysis in response to CAR’s December
2010 presentation. Rather, the comments focus solely on the CAR-defined scenarios and analysis
structure. Correction of the errors detailed in the attached document is, we believe, critical to a
fair, accurate, and constructive discussion of the impacts of potential greenhouse gas / CAFE
regulations.

Respectfully,

Drew Kodjak John German

Executive Director Program Director