Obama MPG Proposal Raises Stakes for Green Car Tech

Automakers received yet another push this morning to accelerate efforts to clean up their fleets, with the unveiling of tough, new limits for tailpipe emissions set to take effect in 2012. If the big automakers were interested in bringing startups with clean vehicle technology into the fold before as a way to leapfrog lengthy internal R&D efforts — Daimler, for example, teamed up with Tesla Motors this morning to help get an electric version of its Smart model on the road as soon as possible, and Chrysler tapped startup A123Systems for lithium-ion batteries in hopes of getting its ENVI lineup off the ground — they may now have added pressure to consider such deals.

The Obama administration’s proposal includes a 39 MPG average for automakers’ passenger car lineups, plus a 30 MPG average for light trucks and 35.5 MPG overall — all by 2016. That’s four years earlier than required under the current standards, established as part of the 2007 energy bill. The proposal has tighter standards beginning to take effect in 2012.

The administration wants to go beyond fuel economy to also address pollution. If the proposed rules make it through the EPA and the Transportation Department, it will be the first time the U.S. combines MPG standards and tailpipe pollution controls into a single regulation. It will also be the first national fuel economy standard, as Obama has largely taken up the stricter standards proposed by California and 13 other states. As the Associated Press notes, handing CAFE standards development and enforcement over to the federal government could be a boon for states like California with mounting budget troubles.

The accelerated time table means automakers that are already playing catchup on batteries and other clean technologies have less time to boost their fuel economy and shrink their emissions. This means startups that have cutting-edge technology already in the works could draw more interest from auto companies feeling pressure to meet the proposed national standards. It also intensifies the time pressure on startups racing to grab big licensing or supply deals. Accelerated MPG improvements might in the near term help startups like shocks developer Levant Power and fuel-injection system maker Transonic Combustion, as well as battery makers like GM technology partner Sakti3 and A123Systems.

But as we’ve noted before, persuading automakers to adopt a startup’s MPG-boosting technology isn’t easy: Most young ventures haven’t had time to gather data about how their systems function long term, which automakers, thinking about considerable warranty costs, will want to have before committing to big supply deals. General Motors, for example, chose South Korea-based LG Chem over runner-up A123Systems as the supplier for its Chevy Volt battery cells, in part to avoid the risk that comes with working with a young company.

Efficient diesel engines may also get a boost. As we wrote recently, diesel engines have a role to play in helping automakers meet tightening fuel economy standards over the near term, and thus in the next generation of vehicles on U.S. roads. Startups ready to license technology to U.S. companies or sell plug-and-play components may be able to ride that wave.

Having a better idea of what vehicle standards will look like for the next seven years is important for automakers weighing investments in green car technology, as the U.S. Auto Alliance wrote in a statement this morning:

Automakers would know what standards will be through 2016, which is critical in an industry where bringing a product to market typically takes five to seven years. The National Program is intended to give automakers sufficient lead-time to incorporate technology as part of existing vehicle design schedules, so manufacturers would not have to incur added costs from redesigning all their models at one time.

The question now (well, one of them, at least) is how much of that they’ll do in-house, through established suppliers — and how much they’ll turn to startups. In order to make “sustainable mobility” a reality, Auto Alliance President and CEO David McCurdy said in the group’s release, “we will need to use every engineer we have and every investment dollar available.”

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