Will new CAFE standards push light trucks off the road?

In late summer, the federal government officially announced its new Corporate Average Fuel Economy (CAFE) standards. Although viewed as slightly aggressive, the new standards require auto manufacturers to raise the average fuel efficiency for new cars and trucks to 54.5 miles per gallon by 2025.

At first glance, it seems that smaller vehicles gradually will rise to dominance based on the sharp increase in the CAFE standards. However, this is a somewhat unrealistic view, as it is still important to factor in consumer demand. Pickup trucks, SUVs, crossover vehicles and even sports cars still are popular with drivers and are likely to remain a big part of the vehicle mix as we move forward.

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One of the important trends to watch in the coming years will be how engine technology evolves to allow manufacturers to continue to meet consumer demand. An excellent example is the shift in engine technology in the pickup truck segment in the past two years. 

Today in the United States, full-size pickup trucks account for 14.6 percent of vehicles in operation (VIO), and even with fuel prices hovering around $4 per gallon, these trucks accounted for 20.9 percent of new vehicle registrations in the first half of 2012. However, one of the biggest trends in pickup trucks is downsizing from big V8 engines to smaller, more efficient V6 engines.

Six-cylinder, turbo-charged engines in full-size pickup trucks are up by 274.4 percent from 2010 and 25.5 percent from 2011. Traditional V8 engines in full-size pickup trucks are down 20.8 percent since 2010 and another 10.3 percent since 2011.

As seen above, here are some pickup truck engine facts for 2012:

VIO Today:	69.9 percent of all full-size pickups are 8 cylinder and normally aspirated
VIO Today:	9.5 percent of full-size pickups are 8 cylinder and turbo/supercharged
VIO Today:	12.4 percent of all full-size pickups are 6 cylinder and normally aspirated
VIO Today:	2.2 percent of full-size pickups are 6 cylinder and turbo/supercharged
New 2012 CYTD Sales:	48 percent of all full-size pickups are 8 cylinder and normally aspirated
New 2012 CYTD Sales:	9.9 percent of full-size pickups are 8 cylinder and turbo/supercharged
New 2012 CYTD Sales:	6.8 percent of all full-size pickups are 6 cylinder and normally aspirated

What are the implications for the aftermarket? First, changes in the numbers of vehicles in operation move at a somewhat glacial pace. Even if smaller vehicles are to gain market share year-over-year, these gains still will be relatively small in the universe of vehicles that represent business opportunities for the aftermarket. Second, automakers know they still need to meet consumer demand for functionality and driving characteristics. Contractors still need full-size pickup trucks to get the job done. Americans still have a love for big vehicles.

For the aftermarket, it’s important to continually monitor vehicles in operation, particularly on a regional level, to have an accurate read on what parts are most necessary to stock. In addition, it is important to understand that technology advancements are a leading indicator of what vehicles are likely to be on the road. The more manufacturers shrink engine size but improve power output, the more likely it will be for larger vehicles to maintain relatively high levels of market share.

The bottom line: Small-vehicle sales growth still might be on the horizon. However, the evolution of engine technology will ensure that the aftermarket will still need to be prepared for a diverse population of vehicles on the road.