cost-effectiveness of fuel economy improvements in 1992 honda

COST-EFFECTIVENESS OF FUEL ECONOMY IMPROVEMENTS IN

1992 HONDA CIVIC HATCHBACKS

Jonathan G. Koomey*, Deborah E. Schechter

, and Deborah Gordon

*Staff Scientist

Energy Analysis Program

Energy and Environment Division

Lawrence Berkeley Laboratory, Building 90-4000

University of California

Berkeley, CA 94720

Research Associate and

Senior Transportation Analyst

Union of Concerned Scientists

2397 Shattuck Ave, Suite 203

Berkeley, CA 94704

May 1993

The work for this paper was completed on Jon Koomey's personal time. The time of Deborah Schechter

and Deborah Gordon was paid for under the Union of Concerned Scientists' Transportation Policy Program.

The views expressed here do not necessarily represent the views of the Lawrence Berkeley Laboratory.

A summary of this report has been accepted for publication by the National Research Council's

Transportation Research Board (TRB), Committee on Energy Conservation and Transportation Demand

(Presented at the 72nd Annual meeting of the TRB in Washington DC, January 10-14, 1993)

This report has been granted the Fred Burggraf Award by the TRB. This prize "recognizes excellence in

transportation research by researchers 35 years of age or younger".

COST-EFFECTIVENESS OF FUEL ECONOMY IMPROVEMENTS IN 1992

HONDA CIVIC HATCHBACKS

Jonathan G. Koomey*, Deborah Schechter

, and Deborah Gordon

*Energy Analysis Program, Lawrence Berkeley Laboratory

Union of Concerned Scientists

ABSTRACT

Since the early 1980s, U.S. auto makers and policy makers have resisted policies to

increase automobile fuel economy, arguing in part that such increases were neither

technically feasible nor economically justified. This paper analyzes such assertions for the

1992 Honda Civic hatchbacks. These new Hondas are virtually identical to the previous

year's models in size, vehicle amenity, engine power, and performance, but they offer

substantially increased fuel economy and improved safety. We assess the cost of

improving fuel economy using actual retail prices, after correcting for differences in

cosmetic features.

Our calculations show that the efficiency of the 1991 Civic DX was improved by 56% from

1991 to 1992, at a cost per conserved gallon of gasoline that is $0.77/gallon, or 30% less

than the levelized gasoline price without externalities or taxes. In addition, a comparison of

two other Civic models reveals that fuel economy was improved in the 1992 version at no

additional cost. Virtually all of the efficiency increases described here were achieved

through measures that do not affect safety or vehicle size, such as engine modifications,

transmission alterations, and drag reduction.

Page 1

COST-EFFECTIVENESS OF FUEL ECONOMY IMPROVEMENTS IN 1992

HONDA CIVIC HATCHBACKS

Jonathan G. Koomey*, Deborah E. Schechter

, and Deborah Gordon

*Energy Analysis Program, Lawrence Berkeley Laboratory

Union of Concerned Scientists

I. INTRODUCTION

Since the early 1980s, U.S. auto makers and some analysts (Shin 1989) have argued that

policies to increase automobile fuel economy were neither technically feasible nor

economically justified. This paper applies Kenneth Boulding's first law ("Anything that

exists is possible") to analyze such assertions in the case of the 1992 Honda Civic

hatchbacks. These new Hondas are virtually identical to the previous year's models in

size, vehicle amenity, engine power, and performance, but they offer substantially

increased fuel economy and improved safety.

This paper first describes the characteristics of the 1991 and 1992 Honda Civics and

demonstrates their equivalence in vehicle amenity. Second, it presents the fuel economy

technologies Honda used to improve the efficiency of the Civic by more than 50%. Third,

it describes the methodology for estimating the Cost of Conserved Energy (CCE) for these

efficiency improvements. Fourth, the paper presents the results of our CCE calculations.

The paper concludes by discussing the potential impact of gasoline taxes and "feebate"

policies on both consumer and manufacturer behavior related to energy efficiency choices

for these vehicles.

II. CHARACTERISTICS OF HONDA CIVICS

General Description

The 1992 model year Honda Civics represent a "new generation" of Civics. Honda

completely redesigned the engine, body style, suspension, aerodynamics, and other major

features of this model, but kept total interior space constant while improving performance.

In addition, Honda added a new hatchback, the VX, to its Civic line. The VX is similar to

the mid-cost Civic DX hatchback, except that the VX is optimized for fuel economy.

Table 1 presents specifications and features of the 1991 and 1992 Civic DX and VX

hatchbacks (Honda 1990, Honda 1991, Leestma 1992, USAA 1991a, USAA 1991b).

The major difference among the 1991 Civic DX, the 1992 DX, and the 1992 VX is the

improved fuel economy of the 1992 vehicles. The 1992 DX is about 13% more fuel

efficient than the 1991 model, while the 1992 VX has 56% higher efficiency.

For a similar but less detailed comparison of the 1991 2-door base-model Civic hatchback and the 1992

Civic CX hatchback, see Appendix B.

The latter estimate is for the "49-State" VX sold in all states but California. The stricter emissions

requirements in that state made Honda abandon the lean burn technology for VXs sold there, though the

Page 2

The 1992 DX and VX are slightly larger than the 1991 DX, as shown by the interior and

exterior dimensions listed in Table 1.

Additionally, the 1992 models are equipped with a

driver-side airbag, resulting in improved safety over the 1991 DX. It is also noteworthy

that the fuel tank of the VX is nearly two gallons, or 16%, smaller than those of the 1991

and 1992 DX. However, the improved fuel economy of the VX means that a VX owner

would still have to refuel less often than an identical DX owner.

Performance

Other than fuel economy differences, operational and performance variations among the

three cars are minimal. The 1992 VX and the 1991 DX are both rated at 92 horsepower.

However, maximum horsepower is achieved at 5500 rpm in the VX and at 6000 rpm in

the 1991 DX. Thus, the VX engine provides slightly more power at engine speeds up to

5500 rpm, which is the range in which most drivers operate. The 1992 DX reaches a

maximum horsepower of 102 at 5900 rpm. However, in comparison to the VX, the

horsepower difference is likely to go unnoticed unless one drives at engine speeds greater

than 5500 rpm (which few drivers ever do). The time required to go from 0 to 100

kilometers per hour (kph), or 62 mph, is also related to horsepower. There is little

difference between the 1992 DX and the 1992 VX in this area: the 1992 DX takes 10.2

seconds to reach 100 kph while the 1992 VX takes 10.5 seconds.

Another important indicator of vehicle performance is torque. High torque allows quicker

acceleration at low engine rpm (e.g., when accelerating from a stoplight). The 1992 DX

and the VX both provide slight torque improvements over the 1991 DX. The 1992 DX

supplies 98 ft-lbs at 5000 rpm, while the 1991 DX supplies 89 ft-lbs at 4500 rpm. The VX

is likely to have the best "pickup" at engine speeds comparable to those commonly

encountered in everyday driving, as it attains 97 ft-lbs of torque at only 4500 rpm (Keebler

1992a).

Driveability

The comparison of features and specifications has focused on the differences between the

three vehicles on paper. However, before one can conclude that the Civic hatchbacks are

identical in terms of the service they provide, one must also evaluate the cars on the road.

A series of drivers who test-drove the VX found that, in general, it handled well and

performance was impressive. Some drivers found that they had to adjust their driving

styles to take advantage of the taller gearing of the VX (Maio 1992b, Passino 1992). Taller

gearing results in lower engine speeds than those typically experienced in a given gear and

is reflected in the gear ratios listed in Table 1 (see Appendix A for more detailed

information on gearing changes). Some drivers also noted occasional engine "stumble", or

hesitation, during quick acceleration in lean burn operation (Keebler 1992b). This

hesitation occurs as the engine adjusts to a lower air/fuel ratio. All but one Automotive

News reviewer believed that this effect would not adversely influence the average driver's

perception of the vehicle's performance, and the reviewer who found the stumble

unacceptable was a driver who admittedly preferred high performance vehicles (Keebler

California VX still uses the basic VTEC-E engine and the other efficiency technologies found in the 49

state VX. This compromise reduced the efficiency improvement of the California VX to about 51% relative

to the 1991 DX, or to 46.9 mpg composite.

The exception is cargo volume which is 3.3 cubic feet less in the 1992 models. However, passenger

volume was increased by more than 4 cubic feet in the 1992 Civic hatchbacks. Thus, the total interior

volume is nearly equal in the 1991 and 1992 models we evaluate.

Page 3

1992a). For typical Civic drivers (who probably do not seek high power), we can

conclude from these reviews that the performance and driveability of the VX is equivalent

to that of the 1991 and 1992 DX.

Comfort and Amenities

Although the primary specifications and performance of the Civic models are essentially

identical, minor differences exist in the cosmetic features of the DX and VX hatchbacks.

These features and their estimated costs are shown in Table 2 (Honda 1990, Honda 1991,

Maio 1992a, Maio 1992b). The 1991 and 1992 DX models are both equipped with an

adjustable steering column, rear cargo cover, rear windshield wiper, and bodyside

molding, while the VX lacks these features but has a tachometer and lightweight alloy

wheels. The cargo area cover adds utility to the DX models because it hides any cargo and

makes it appear that the vehicle has a trunk. The lightweight alloy wheels on the VX are

cosmetic in that they look "sportier", but they also affect fuel economy due to their lighter

weight.

Safety

The safety of the 1992 Civic models was improved significantly by the addition of a

driver's side airbag in both the DX and VX. The 1991 DX does not have a driver's side

airbag. The added safety provided by the airbag is reflected in reduced insurance

premiums. For example, the United Services Automobile Association (USAA) Casualty

Insurance Company reduces the premium for Medical Payments Coverage (MPC) by 60%

relative to the 1991 DX for owners of either the 1992 DX or VX (Blackstone 1992). There

is no difference in the premium for MPC for the 1992 DX and VX, which indicates that

professional risk assessors of at least one major insurance company believe that the slight

difference in weight of these two vehicles has a negligible affect on safety. Further,

because the VX is lighter than the DX, its use imposes less risk on other vehicles. There

are currently no crash test data with which to further compare the safety of these vehicles.

Emissions

In addition to comparing the fuel economy, performance, and features of the DX and VX

models, it is useful to analyze pollutant emission levels. Emissions are a particular concern

in evaluating the VX because lean burn engines have been associated with higher emissions

of nitrogen oxides (NO

) than traditional engines due to the inability of 3-way catalysts to

control NO

at high air/fuel ratios.

Table 3 presents data on emissions of hydrocarbons (HC), carbon monoxide (CO), and

for the 1991 DX, 1992 DX and 1992 VX models (US EPA 1991a, US EPA 1991b,

US EPA 1992a, US EPA 1992b). The 4,000 mile certification results represent stabilized

emission levels for new motor vehicles.

Changes in emissions caused by vehicle use are

approximated based on testing of prototype vehicles which are driven for 50,000 miles.

This testing results in "deterioration factors", which describe the amount that emissions

increased during the tests as a result of catalyst degradation over time. The 50,000 mile

The new vehicles are driven for 4,000 miles in order to "break them in", as emission levels for brand new,

never-driven vehicles may be highly variable.

Page 4

values provided in Table 3 were obtained by multiplying the 4,000 mile data by the

deterioration factors provided by EPA.

All vehicles easily meet emission standards.

However, there are some noteworthy

variations in emission factors. The VX has significantly higher direct HC emissions than

either the 1991 and 1992 DX models. However, the improved fuel economy of the VX

will result in reduced "upstream" HC emissions from the production and handling of crude

oil and products, as total fuel throughput will be reduced by reducing vehicle fuel

consumption (Deluchi et al. 1992). Thus, the total amount of hydrocarbons emitted from

each of the three cars is similar. The California version of the 1992 DX has higher CO

emissions per mile than either the 1991 DX or the 1992 VX, which are comparable to each

other in this respect.

emissions for the 1992 DX are 24% lower than those of the 1991 DX. NO

emissions are higher for the 49-State VX than either DX model, as expected. However,

the California VX achieves a 43% fuel economy improvement over the 1991 DX while

maintaining NO

emissions that are lower than the 1991 and 1992 DX. This demonstrates

that, given a regulatory mandate, NO

emissions can be reduced. However, the higher

levels for the 49-State VX may indicate a limitation of the present applicability of lean

burn technology.

Though not shown in the table, CO

emissions vary in direct proportion to the amount of

fuel used. This relationship implies that CO

emissions are somewhat lower for the 1992

DX and significantly lower for the 1992 VX than for the 1991 DX.

In summary, emissions from the 49-State version of the VX are comparable to those from

the 1991 and 1992 DX with the exception of NO

, which is higher in the 49-State VX, and

carbon dioxide, which is lower in the more efficient vehicles. All of these automobiles meet

current standards in the states in which they are sold.

Summary

Examination of the specifications of these vehicles and actual test drives reveal that fuel

economy gains were achieved with negligible impact on performance, driveability, and

comfort. We can conclude from the results of this section that the cars deliver equivalent

consumer utility.

III. FUEL ECONOMY TECHNOLOGIES

As discussed above, the 1992 VX provides a 56% improvement in efficiency over the 1991

DX. This is achieved by the use of technological improvements that increase the efficiency

of converting fuel energy to usable work and reduce the amount of work required to move

the vehicle.

This method was used because we were unable to obtain durability testing data from cars with the same

features as those used for 4,000 mile testing.

Federal light-duty vehicle standards for 1992 (in grams per mile) are as follows: HC: 0.41; CO: 3.4;

: 1.0. The California standard for NO

-- 0.4 g/mi -- is more stringent.

Page 5

The technological differences responsible for the improved fuel economy in the VX

include:

• lean-burn VTEC-E engine

• changes in axle and gear ratios

• multi-point fuel injection

• decreased vehicle weight

• improved aerodynamic characteristics

• low rolling resistance tires

• reduced idle speed

• shift indicator light

Table 4 summarizes these fuel economy technologies and presents estimated contributions

to fuel efficiency and costs (in 1992$) associated with each approach (Greene and Duleep

1992, Harrington 1992, National Research Council 1992, SRI International 1991). The

primary technological improvements are described in detail in Appendix A. More details on

particular technologies are available in Bleviss (1988).

The largest percentage improvements come from transmission/gearing and engine

modifications. This fact is noteworthy because changing engine and transmission

characteristics (keeping horsepower and torque roughly constant) does not affect safety or

vehicle size. Weight reduction may have an effect on safety, depending on from where the

weight is removed, but the weight changes in the VX are quite small (3-4%). While it is

possible that the use of certain types of low rolling resistance tires might affect braking and

cornering capabilities, we know of no "on-road" reviews of the Civic VX that compare the

performance of the particular tires used on this vehicle to those used in the 1991 Civic DX.

Capital Costs of Fuel Economy Improvements

The costs of the technologies listed above are not readily available and vary widely

depending on the source of the estimate. Cost estimates are further complicated by the fact

that several of the technologies may overlap. For example, the variable valve feature of the

VTEC-E engine permits the use of lean burn technology and changes in drive ratio. Thus,

an estimate of the cost of variable valve timing may also include the cost of lean burn

technology and drive ratio changes.

Despite these complications, we provide estimated

costs of fuel economy technologies in Table 4. The total estimated costs of these

technologies range from $448 to $1084.

Applicability of Civic VX Improvements to Other Vehicles

Not all technologies used to improve the efficiency of the Civic can currently be transferred

to other new cars. We focus in particular on the applicability of the lean-burn engine. For

VTEC and lean-burn are separable. Honda also uses the VTEC engine in the 1992 Civic Si, but not for

lean burn. Instead, it provides a significant increase in horsepower in conjunction with a modest

improvement in efficiency.

For this reason, we have estimated the cost of lean burn technology to be $100 to $500.

This range neglects axle and gear ratio improvement costs which were unavailable. In principle, the

capital cost of axle and gear assemblies should not vary significantly as gear ratios change.

Page 6

details on how other efficiency options might apply to different portions of the U.S.

automobile fleet, see Ledbetter and Ross (1990).

Keebler (1992b) reports that "heavy vehicles have poor driveability when calibrated with

lean-burn fuel strategies", which implies that this strategy, as currently implemented, may

not be directly transferable to the larger cars in the U.S. fleet. Because of increasingly

strict NO

emissions standards, lean-burn technology may not be viable in some vehicles

until improved NO

catalysts are developed. According to Sanger (1991), Honda

engineers believe it will be "several years . . . before they can transfer the technology to

larger, less efficient engines". However, it has been reported that Honda plans to employ

lean-burn technology on its larger Accord model as early as the 1994 model year (Johnson

1992). Research on this issue is proceeding elsewhere as well. Recently, a company in

Massachusetts announced the development of a new lean-burn engine that combines high

efficiency and low NO

emissions, for an additional cost of $100 to $200 per car (Cutter

Information Corp. 1992).

IV. METHODOLOGY

This Section describes the methodology and assumptions used for the cost-effectiveness

calculations contained in Section V (below). We use actual retail prices to estimate the cost

of improving fuel economy and projections of motor gasoline prices to estimate the

levelized fuel price.

Definition of Cost Effectiveness

By cost effective, we mean that the costs of investing in automobile efficiency are lower

than the costs avoided by this investment. The cost of an efficiency improvement is usually

assessed by calculating the Cost of Conserved Energy (CCE). The costs avoided by the

efficiency investment include the direct cost of the unused fuel, and whatever social or

external costs are associated with the consumption of gasoline that are not included in the

gasoline price. Whenever the CCE is lower than the avoided direct costs plus external

costs ($/gallon), we can say that an efficiency investment is cost effective.

Cost Perspective

We adopt the perspective of the buyer of a new car who will use the vehicle over its entire

lifetime. This simplifying assumption is also roughly comparable to the societal

perspective without externalities (assuming that the discount rate used reflects social and

not individual preferences).

Cost of Conserved Energy

The Cost of Conserved Energy or CCE ($/gallon) is calculated using Equation (1)

CCE ($/gallon) =

Capital Cost ($) x

(1-(1+d)

-n

)

Annual Energy Savings (gallons)

(1)

For more details on such calculations, see Meier et al. (1983) or Koomey et al. (1991).

Page 7

where d is the discount rate, n is the lifetime of the automobile, and

(1-(1+d)

-n

)

is equal to

the Capital Recovery Factor. The numerator in the right hand side of Equation 1 is the

annualized cost of the conservation or efficiency investment. Dividing annualized cost by

annual energy savings yields the CCE, which is independent of, but can be compared to,

the levelized price of fuel (in $/gallon).

Consumer Choice Models

There is some controversy over the procedure that consumers actually use to choose the

efficiency level of the automobiles they purchase. Greene (1983), in a review of such

decision algorithms, summarizes this controversy. The main issue of contention surrounds

the multifaceted nature of the purchase decision. Usually, the choice between vehicles is

based on many different decision criteria, most of which are unrelated to the efficiency of

the vehicle. The use of a Cost of Conserved Energy model (or equivalently, a life-cycle

cost model

) to describe such choices is problematic in that it is a simple measure that does

not address the complexity of the purchase decision.

While this issue is an important one when assessing consumer choices over a broad range

of vehicle types, it does not significantly affect our analysis. We have, to a first

approximation, created a comparison between vehicles that have different fuel economy but

that are otherwise equivalent in terms of size, features, performance, and safety. For this

reason, we believe it is appropriate to discuss choices between these vehicles as if

consumers were actually using a discount rate in a CCE calculation.

Discount Rate

The discount rate in our calculations is 7% real. This value roughly corresponds to the

current cost of capital for consumers seeking an auto loan (11% to 12% with inflation).

We also perform a sensitivity analysis using real discount rates of 3%, 10%, and 30%.

Miles Driven

We use an estimate of 10,200 miles traveled per year for a typical U.S. automobile in

1988, taken from Davis and Morris (1992). The source cited by Davis and Morris is the

U.S. Department of Energy's Residential Transportation Energy Consumption Survey.

Rebound Effect

Greene (1992) suggests, after reviewing the literature, that consumers will increase their

vehicle miles traveled by 0.05% to 0.15% in response to a 1% decrease in the fuel cost per

mile of their vehicle. We omit this factor in calculating the CCE, because if consumers use

their vehicles more, the increased mobility must be worth more to them than the increased

expenditure on gasoline. Therefore, our per-unit cost-effectiveness calculation is

unaffected by such rebound.

A life-cycle cost model is one in which future costs are discounted back to the present using some

discount rate and are added to the capital cost of a given device. The same calculation is performed for

different devices delivering the same service, and the device with the lowest life-cycle cost is chosen as the

optimal one. The issue usually relevant to automobile choices is that the level of service is rarely constant

between automobiles.

Page 8

If one is interested in calculating total energy savings from a given policy affecting many

such vehicles, then this correction factor must be included. We do not make such a

calculation here. In any case, the correction is a small one.

Vehicle Lifetime

We use an estimate of automobile lifetime of 13.3 years derived from a retirement curve for

vehicles presented in Davis and Morris (1992). This curve applies to vehicles purchased

between 1987 and 1989. We assume that the fuel economy improvement technologies

used in the VX will not affect the vehicle lifetime.

Rated Fuel Economy

Fuel economy estimates based on the EPA test procedure have been found to diverge from

actual performance. This divergence was significant enough to induce EPA to reduce the

sticker fuel economy relative to the test procedure values to better account for real-world

driving conditions. Beginning in 1985, EPA reduced the city fuel economy estimates from

the test procedure by 10% and reduced the highway estimates by 22% to calculate the fuel

economy rating on the sticker.

This correction is important because if actual miles per

gallon (mpg) is lower than the rated mpg, then using the rated mpg to calculate gasoline

savings will underestimate those savings in absolute terms.

We use the city and highway fuel economy as listed on the EPA sticker for each car, which

includes the above correction factors. We weight the city and highway fuel economy

sticker values to estimate composite fuel economy for our cost effectiveness calculations.

This weighting assumes that 55% of driving is city driving and 45% is highway driving, as

specified in the Energy Policy and Conservation Act passed in 1975 (EPCA 1975).

Consistency of Comparison

All fuel prices and capital costs are in 1992 dollars. We use a real discount rate (without

inflation) to levelize the prices, and use the same real discount rate to calculate the Cost of

Conserved Energy. The comparison between the initial capital expense and the levelized

fuel price is therefore a consistent one.

Fuel Prices

Average motor gasoline prices are taken from the Annual Energy Outlook (US DOE 1992),

and are levelized using a 7% real discount rate (using the method from Kahn (1988)).

According to the forecast, the retail price of motor gasoline will be $1.27/gallon in 1992

There is some controversy over whether these corrections are sufficient to account for real-world

conditions, with some analysts arguing that even higher reductions in composite mpg (20% to 30%) are

justified because congestion is increasing. There is also uncertainty about whether the corrections used by

EPA, which represent an average over all vehicles, give an accurate picture for the particular cars of interest

in this paper. We do not address either of these issues here, but note that the first would increase the

relative cost effectiveness of the cars under consideration, while the second would have an unknown effect

on cost effectiveness.

Page 9

and $1.61 in 2005.

Levelized over this period (which corresponds to the lifetime of our

Honda Civic purchased in 1992), the price of gasoline is $1.40/gallon.

This price includes roughly $0.25-0.30 per gallon of state and federal gasoline taxes,

which are used primarily to fund highway construction and maintenance.

Society does

not avoid the construction and upkeep of roads if automobiles are more efficient, so a

societal cost comparison should not include these costs in the avoided cost of fuel. This

price also does not include the external costs associated with gasoline combustion, many of

which are reduced by a more fuel efficient car.

We show comparisons with the levelized fuel price with and without taxes. The case with

taxes provides an understandable reference point, and represents the situation in which

avoidable external costs roughly equal the level of state and federal taxes. The case without

taxes represents the situation in which external costs are assumed to be equal to zero.

Operation and Maintenance Costs

We assume that operation and maintenance (O&M) costs for the VX are unaffected by the

technologies used to achieve improved fuel economy. Thus, we assume lifetime O&M

costs for the 1991 and 1992 DX models and for the 1992 VX are identical.

Invoice Cost vs. Manufacturer's Suggested Retail Price

Invoice cost is also known as "Dealer cost". It is the average price charged to the dealer by

the auto manufacturer. Manufacturer's Suggested Retail Price (MSRP) is also known as

"Sticker Price", and is supposed to represent the price of the car to the consumer. In this

analysis, we choose to rely on MSRP as an "official" price, but also show the invoice cost

in our tables. The invoice cost and MSRP are taken from USAA (1991a, 1991b) and

documents from a local Honda dealer. The invoice cost and MSRP for the 1991 DX have

been adjusted to 1992 dollars, assuming 4% inflation.

The MSRP is somewhat arbitrary. Good bargainers have been known to purchase autos at

or below the invoice cost. Auto manufacturers also give "volume incentives" to dealers that

sell more than a target number of cars. Therefore, invoice cost and MSRP based on the

sale of a single car may not actually reflect the true cost to the dealer.

Does Retail Price Reflect True Cost?

Automobile pricing is a complicated process and the market price of a vehicle may have

little to do with actual production costs. For example, anti-lock braking systems provided

as an option on many cars are currently under priced on the vehicle "sticker" in order to

encourage the purchase of these safety-enhancing mechanisms (Rinek 1992). Some of the

redesign costs for the new Civics are probably included in the MSRP, as are any savings

from the redesign. Without detailed manufacturer data, we cannot determine the extent to

The Annual Energy outlook reports fuel prices in 1990 dollars, which we have adjusted to 1992 dollars

by assuming 4% inflation in each of the two intervening years.

Of the current 14.1 cents/gallon federal gasoline tax, 10.1 cents are used for highways, 1.5 cents fund

transit services, and 2.5 cents are devoted to budget deficit reduction per the Budget Reconciliation Act of

1990, which extends through 1995. State taxes in California are roughly 16 cents/gallon, and are

comparable to those of other states.

Page 10

which such cost changes are related to fuel economy improvements alone. We also cannot

know whether Honda is taking a loss on the VX because it wants to gain experience with

new technology in anticipation of growing demand for efficiency in a more environmentally

conscious world.

We do not have access to Honda's cost data, and we cannot determine the manufacturer

cost for improving the fuel economy in the Honda Civic hatchbacks. Nevertheless, we

believe that the MSRP offers an approximate representation of the actual cost of improving

auto fuel economy in these vehicles.

Airbags

The 1992 Civics both have airbags, while the 1991 DX does not. Except for a minor

weight penalty, airbags are unrelated to fuel economy, and their cost should not be included

in our assessment of the incremental cost associated with improving the efficiency of the

1991 DX. According to Maio (1992b), the MSRP cost of an airbag is $800 in a new

Honda Civic, and $1200 to replace an airbag that has been "blown" in a collision. We

subtract $800 from the MSRP cost of the 1992 DX and VX to correct for this added cost.

Correction for Cosmetic Differences

The cargo cover is available as an option on the VX for $159. Costs for the other cosmetic

differences shown in Table 2 can only be roughly estimated based on estimates by the parts

department of a local Honda dealer.

We add the average cost of hatch cover, body side molding, and rear wiper/washer to the

cost of the VX (no correction is made for the cost of the adjustable steering column, since

the cost to replace the steering columns in the DX and the VX are the same). We add the

midrange cost of the tachometer and half of the cost of the alloy wheels

to the price of the

1991 and 1992 DX.

These cosmetic differences result in an additional MSRP cost of $365 on both DX models,

and $614 on the VX. By correcting for cosmetic differences and for the airbag, we have

created a consistent comparison and can draw conclusions about the actual cost to improve

the efficiency of the 1991 DX to the level of the 1992 VX. These corrections result in what

we refer to as our "Full Correction Case", which represents our best estimate for the retail

price of the fuel economy improvements in the VX as compared to the DX.

Although these cost corrections make the comparison a more consistent one, they should be

viewed as approximate for three reasons:

1) Actual costs for these options are speculative, since the features available on the

VX are not available on the DX, and vice-versa.

The invoice cost for the airbag is calculated by multiplying the MSRP of the airbag times the ratio of

the invoice and MSRP for the entire car. The MSRP markup thus calculated is 17%.

Only half the cost of the alloy wheels is added to the DX price because some fraction of their cost is

attributable to their lower weight and the rest is attributable to their "sporty" appearance. We choose half

arbitrarily, since we had no way to separate these two attributes of the wheels.

Page 11

2) Actual production costs for standard features may be quite different from the

costs for installing such features as options after the car is manufactured.

3) Separating the cost of the alloy wheels attributable to cosmetic differences from

that attributable to fuel economy is problematic.

To account for the fact that some options are not available on specific models in the

showroom, we also show a comparison between the 1992 DX and the 1992 VX that only

corrects for the feature that is actually an option -- the hatch cover. We refer to this case as

the "As Available" comparison.

Comparison of Estimated Technology Costs with Retail Cost Difference

When we compare the estimated costs of fuel economy technologies (Table 4) to the retail

cost difference calculated after making the corrections described above, we see that the

results are similar. The mean of the engineering cost estimates for the VX efficiency

improvements (Table 4) is $766, while the cost difference between the 1991 DX and the

1992 VX in Table 5 (based on the "Full Correction" case) is $726. In view of the rather

large range of error to be expected in such a comparison, we can conclude that the

engineering costs and our retail cost calculation give roughly the same result, which gives

us confidence that our calculations are of the correct approximate magnitude.

V. COST EFFECTIVENESS OF FUEL ECONOMY TECHNOLOGIES

Cost of Improving 1991 DX Efficiency to 1992 DX and VX Levels

In this calculation, we estimate the cost of improving fuel economy of the 1991 Honda

Civic DX to the levels of the 1992 Civic DX and VX. This information can be used to

determine whether the fuel economy of a particular vehicle can be improved substantially at

a cost less than the cost of fuel, while keeping vehicle amenity constant and without

reducing safety.

Table 5 shows the results of this calculation. The MSRP cost of an airbag ($800) has been

subtracted from the cost of the 1992 Civics, which makes the 13% efficiency improvement

for the 1992 DX achievable at negative net cost.

Engine torque also increased relative to

the 1991 DX in this case. This result implies that Honda improved the fuel economy and

power of this vehicle while reducing its initial cost.

After subtracting the cost of the airbag, the additional incremental cost for the VX over the

1991 DX is $477. The correction for cosmetic differences increases the incremental cost of

moving from the 1991 DX to the 1992 VX by $249, giving a total incremental cost for the

VX of $726. This $726 cost translates to a Cost of Conserved Energy of $0.77 per

conserved gallon, which is about 45% less than the levelized price of gasoline with taxes

and 30% less than the price without taxes. This CCE corresponds to a simple payback time

of about 4.6 years using MSRP and including taxes in the gasoline price, and 5.9 years

when taxes are omitted.

For another such calculation that shows a similar result, see the comparison of the 1991 2 door base-

model Civic hatchback with the 1992 CX hatchback in Appendix B.

Page 12

Cost of the Consumer's Choice: 1992 DX vs. 1992 VX

We also investigate the actual efficiency choice available to consumers on the showroom

floor (1992 DX vs. 1992 VX). We show two cases: (1) the "As Available" case, which

corrects only for the cost of the hatch cover in the VX, and (2) the "Full Correction" case,

which uses the cost estimates for all the cosmetic differences from Table 2. Table 5 shows

the results of this calculation, which indicates that the Cost of Conserved Energy relative to

the 1992 DX (based on MSRP) is comparable to the levelized price of gasoline with taxes

and roughly 25% to 30% higher than the levelized price of gasoline without taxes.

This

CCE corresponds to a simple payback time of about 8 to 11 years depending on the

treatment of taxes and cosmetic differences. These paybacks are long enough to make

consumers think twice about spending the extra money for the VX.

Sensitivity of Results to Discount Rate

Table 6 summarizes the effect of using 3%, 7%, and 10% real discount rates on the cost to

society of employing the technologies in the 1992 VX relative to the 1991 DX. This range

corresponds to that typically used in cost-benefit analyses. As expected, the Cost of

Conserved Energy goes down in the 3% case and up in the 10% case relative to the case

using the 7% real discount rate. Note also that the levelized gasoline price also changes

(the levelization procedure is a type of present-valued average, which depends on the

discount rate). With these discount rates, the CCE of the VX relative to the 1991 DX never

exceeds the levelized gasoline price (with or without taxes), which indicates that our

finding of cost-effectiveness for the VX compared to the 1991 DX is robust with respect to

assumed discount rates. Only when the 30% real discount rate (roughly corresponding to a

three-year simple payback) is applied does the CCE exceed the levelized price of fuel.

In assessing the consumer choice between the 1992 DX and the 1992 VX, we find that the

10% real discount rate pushes the CCE over the levelized fuel price with taxes by roughly

20-30%. The 3% real case produces a CCE that is roughly 10-20% lower than the

levelized fuel price with taxes. The CCE ranges from 15% to 70% higher than the fuel

price without taxes in the 3% real and 10% real cases, respectively. When the 30% real

discount rate is applied, the CCE jumps to 2 to 3 times the price of fuel, which illustrates

why consumers, many of whom do not use such paybacks in making investment choices

for energy-using equipment, might not find the VX an attractive investment.

Limitations of Cost Effectiveness Calculations

These calculations were done without accounting for external societal costs. External costs

include all costs to society that are not included in the market price of gasoline, such as:

increased health costs, costs arising from damage to agriculture, and costs resulting from

damage to physical structures due to air pollution from automobiles; increased national

security costs from consumption of imported oil; and increased environmental damage from

acid rain, carbon dioxide emissions, and other pollutants. In practice, exact numerical

Different consumer preferences about the worth of various accessories could change this assessment. If

the consumer finds body side molding to be a frill, or is not interested in the rear wiper, this could make the

VX more attractive. If the consumer finds the tachometer to be a frill and doesn't care about the sportier

look of the alloy wheels, this assessment would make the 1992 DX relatively more attractive.

Page 13

values for these externalities are difficult to calculate.

Many authors have attempted to

assess these costs in monetary terms, and in general, they find that such costs are probably

substantial (Bohi and Montgomery 1982, Broadman 1986, Cannon 1990, DeLuchi et al.

1987, Hall 1992, MacKenzie et al. 1992). We do not estimate these costs here, but simply

note that accounting for them would improve the relative cost effectiveness of efficiency

improvements compared to the consumption of gasoline alone.

VI. POLICY IMPLICATIONS

The range of issues surrounding policies designed to affect vehicle efficiency choices are

too complex to describe in detail here, and are described elsewhere (Gordon 1991, Griffin

and Steele 1986). Our purpose in this section is to describe the most important policy-

related conclusions emerging from our work, and to illustrate in this specific example the

potential effects of gas taxes and feebates on the consumer's choice between the 1992 DX

and VX models.

Implications for Society

We have shown that improving the fuel economy of a particular vehicle (the 1991 Civic

DX) was not only possible, it was cost-effective from society's perspective. The efficiency

improvements in the 1992 Civic VX were achieved at a Cost of Conserved Energy that is

about 45% less than the levelized cost of gasoline with taxes, and 30% less than the

levelized cost of gasoline without taxes (relative to the 1991 DX). This empirical evidence

indicates that, at least for small cars similar to the Civic, improvements in fuel economy can

be achieved at attractive costs.

Implications for Consumers

The 1992 Civic DX and VX deliver comparable performance, but the VX delivers higher

fuel economy at a Cost of Conserved Energy that is comparable to the avoided cost of fuel.

A consumer deciding between these two vehicles will have little, if any, direct economic

incentive to choose the VX, although the U.S. as a whole might prefer the lower carbon

dioxide emissions and reduced use of imported oil of the more efficient vehicle. According

to estimates from Honda Corporation, about 5% of '92 Civic sales were VXs (Pollack

1992).

Effects of Increased Gas Taxes and Feebates

In this section we investigate the effect of commonly discussed policy measures on the

consumer's choice between the 1992 DX and VX models. We discuss only the effect of

gas taxes and feebates on the life-cycle cost of the 1992 DX and VX models, and do not

address the rationale for such policies. It is important to note that these policy tools have a

different focus: gas taxes affect the cost of operating the car over its lifetime while feebates

alter the initial cost to the consumer of purchasing the vehicle.

Gas taxes: Gas taxes in the range of $1 to $4 per gallon are common in Europe and Japan.

Taxes that are only a fraction the size of the European taxes (e.g., an additional $0.50 per

gallon) would tip the balance of cost effectiveness in favor of the VX relative to the 1992

DX for consumers who use discount rates of 3% to 10% real. Consumers who use simple

See Koomey (1990) for a discussion of the pitfalls of estimating monetary values for externalities.

Page 14

payback times of about 3 years, corresponding to real discount rates of roughly 30%,

would require gasoline taxes of $2 to $3 per gallon to make the VX cost competitive with

the 1992 DX.

Feebates: This policy mechanism puts fees on inefficient cars, gives rebates to efficient

cars, and uses the fees to pay for the rebates (Griffin and Steele 1986, Koomey and

Rosenfeld 1990). We examine the financial impact of two currently proposed feebate

strategies on the consumer's choice between the 1992 DX and VX:

(1) The California legislature is considering a feebate program called DRIVE+,

which would offer a rebate based on vehicle carbon dioxide emissions (a measure

of fuel efficiency) on the order of $0.20 per gallon of gasoline or $21 per metric

tonne of carbon dioxide.

If adopted in a state other than California, consumers

buying a Civic VX would be eligible for a $160 greater rebate than the DX due to

its higher fuel efficiency rating.

. The rebate difference within California would

be lower because of the lower efficiency of the California VX.

(2) The State of Maryland recently enacted feebate legislation that would adjust the

vehicle titling tax based on a vehicle's fuel economy .

Other states are interested

in adopting similar legislation. The Maryland program limits feebates to one

percent of the new car sales price ($100 for the DX and $110 for the VX).

However, other states are considering feebate legislation that calculates feebates

based on fuel efficiency levels without limitation.

If we estimate the size of feebates using the calculation methods detailed in the

Maryland legislation, but without restricting their size, we find that those

purchasing a new Civic VX would be eligible for an $800 rebate while a DX buyer

would only receive a $200 rebate. This $600 difference in rebates is over 85% of

the difference in the MSRPs of these models.

Either gas taxes or feebates may persuade consumers (and therefore manufacturers) to

purchase (and produce) more efficient vehicles such as the Civic VX.

DRIVE+, as currently conceived, would also offer feebates on vehicle emissions of air pollutants. A fee

or rebate depending of the car's emissions rating ("low-emission vehicle", "ultra-low-emission vehicle, etc.)

in accordance with 1994 emission specifications would be added to the carbon dioxide feebate detailed above

to arrive at the financial incentive or disincentive offered to the consumer. The 1993 Civic VX has been

certified to meet California's transitional-low-emission vehicle standards and would be subject to a rebate

based on lower emissions as well as a rebate for high efficiency (Automotive News 1992). Senator Gary

Hart (D-Santa Barbara) is the sponsor of this feebate legislation–SB 431.

We only considered the CO

feebate in this calculation because the emission feebate component depends

on the model's emission status starting in 1994 which has not yet been determined.

The State of Maryland's fuel efficiency feebate policy was passed by the legislature and signed into law

by the governor in 1992. However, the federal government is currently challenging the state law based on

preemption language in the federal fuel economy statute. Maryland's Attorney General maintains that the

state has the right to enact the law. Further action is expected to break this deadlock in 1993.

Page 15

VII. CONCLUSIONS

Honda increased efficiency by 13% in the 1992 DX and by 56% in the 1992 Civic VX

(relative to the 1991 Civic DX), with negligible impacts on performance, driveability, and

comfort. The efficiency improvements in the 1992 DX (based on actual retail/MSRP

prices) were captured at negative net costs. The Cost of Conserved Energy for the

efficiency improvements in the 1992 Civic VX was significantly lower than the levelized

price of fuel (45% less than the cost of the saved gasoline with taxes, and 30% less than the

cost of the saved gasoline without taxes). These results suggest that the difficulty and cost

of improving fuel economy in new compact and subcompact automobiles may be less than

has been suggested by U.S. auto makers.

ACKNOWLEDGMENTS

Review comments and valuable advice were provided by Chris Calwell (NRDC); Lee

Schipper, Rich Howarth, Evan Mills, and Alan Sanstad (LBL); Amory Lovins (E-Source);

and Marc Ross (University of Michigan and Argonne National Laboratory). Jack Keebler

of Automotive News provided insight into the performance and driveability of the 1992

VX. Toni Harrington of Honda North America gave us detailed information on fuel

economy improvement technologies. Finally, thanks are due to Jim Doten's Honda of

Berkeley, CA for allowing us to test drive the 1992 Civics on more than one occasion and

for providing information on consumer response and option costs.

Page 16

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Page 19

APPENDIX A: MORE DETAIL ON FUEL ECONOMY TECHNOLOGIES

This section describes in detail each of the fuel economy technologies used in the Civic

VX.

VTEC-E Engine

The Honda Variable Valve Timing and Lift Electronically Controlled (VTEC-E) engine is a

4-valve per cylinder, variable valve engine optimized for fuel economy. It is a completely

different engine than that found in the 1991 and 1992 Civic DX hatchbacks. The VTEC-E

engine has variable valve timing and uses lean burn technology. Additional modifications

to reduce engine friction contribute further to the improved fuel economy of the VTEC-E

engine.

Variable valve timing: Conventional engines use fixed valve timing and lift (height of

intake valve) at all engine speeds. At light loads when lower power is required, fixed valve

timing results in pumping losses, or efficiency losses due to the use of energy to pump air

and fuel into the cylinder and push out the products of combustion. Pumping losses occur

because, in order to reduce power, air and fuel input must be decreased using a throttle that

produces a pressure differential between intake and exhaust valves on the engine cylinder,

resulting in a loss of efficiency. Thus, closing the intake valve at light loads would reduce

the pressure differential and decrease pumping losses. This is the principle on which

variable valve timing operates. In the VTEC-E engine, the valve cycles are electronically

controlled to promote more complete combustion at lower engine speeds, thus reducing

fuel requirements. At low rpm, one of the two intake valves in each cylinder of the VTEC-

E engine is nearly closed. This creates a swirling motion in the combustion chamber. The

mixing and turbulence caused by this motion, combined with central placement of the spark

plug, shorten combustion time and assure more complete combustion. Combustion time is

also lessened by reducing the surface to volume ratio of the combustion chamber. The use

of variable valve timing also enhances low speed torque, allowing gearing modifications

(see below). At higher rpm, when more power output is required, both intake valves are

activated simultaneously with full lift to provide power comparable to engines without

variable valve timing (Honda Motor Co. Ltd 1991). Honda estimates that this feature

produces a 2.5% increase in fuel economy (Harrington 1992).

Lean burn technology: A lean burn engine is operated with air in excess of that required for

complete combustion (a high air/fuel ratio). Fuel economy increases with the addition of

excess air to the combustion chamber, as more air results in more complete combustion of

fuel, improves the efficiency of converting fuel energy into usable work (thermodynamic

efficiency), and decreases pumping losses. The use of variable valve timing and electronic

control enabled Honda to incorporate lean burn technology in the 1992 Civic VX. At low

engine speeds, the VTEC-E engine can operate at air/fuel ratios as high as 25:1, compared

to the stoichiometric ratio of 14.7:1 at which there is just enough air to theoretically achieve

complete combustion. At low rpm, the swirl motion, discussed above, creates turbulence

and results in the formation of a rich mixture (lower air/fuel ratio) that is maintained in a

vortex near the spark plug, while the total air/fuel ratio in the combustion chamber remains

lean. At higher speeds, the ratio decreases to approximately stoichiometric via electronic

control. This return to stoichiometric conditions at high rpm resolves a problem common

to lean burn systems where wide open throttle power decreases because less fuel is burned.

Another problem associated with lean burn is an increase in nitrogen oxide (NO

)

emissions due to inability of the 3-way catalysts to control NO

at high air/fuel ratios. In

order to meet more stringent NO

emission standards in California, Honda modified the

VX to use exhaust gas recirculation (EGR) instead of excess air to dilute a stoichiometric

Page 20

air/fuel ratio. Using EGR, exhaust gases are recirculated into the combustion chamber to

reduce NO

emissions by lowering combustion temperature. EGR also improves fuel

economy by using energy from the waste stream. However, lean burn is more efficient

than EGR. The lean burn characteristic of the VTEC engine has been estimated to account

for a five to ten percent improvement in fuel economy over the 1992 DX (Harrington

1992). Although the lean burn technology is used successfully in the Civic VX, it had

been largely dismissed by researchers as "speculative" prior to the release of the Civic VX

and was not considered viable in larger cars due to uncertainty about the performance of

nitrogen oxide catalyst technology in such applications (OTA 1991).

Reduced engine friction: Useful energy is lost due to friction between engine components

including pistons and rings, valve train, and crankshaft. Engine friction has been reduced

in the VTEC-E engine by the use of coated pistons and special low-friction piston rings.

Honda estimates that reduced engine friction in the VX contributes to a 1.5% fuel economy

improvement (Harrington 1992).

Roller cam followers: Intake and exhaust valves are operated by a camshaft in contact with

a cam follower. The VTEC-E engine uses roller cam followers that reduce valve train

friction by replacing the sliding contact between the roller cam and camshaft with a rolling

contact. According to Honda, they increase fuel economy by approximately one percent in

the VX (Harrington 1992).

Changes in Axle or Drive Ratio

Axle or drive ratio is defined as the ratio of revolutions of the drive shaft, or transaxle, to

the revolutions of the wheels. Generally, a low ratio means less engine wear and better

fuel economy than a higher ratio. However, a lower ratio will also result in slower

acceleration and decreased performance. The VTEC-E engine's variable valve timing

enhances low-speed torque, meaning that torque is higher at lower rpm than in the standard

Civic engine. This advantage allows a reduction in drive ratio without compromising

performance (Honda Motor Co. Ltd 1991). The drive ratio of the VX is 16% lower than

that of the 1991 DX and 20% lower than that of the 1992 DX. In general, a 10% decrease

in the axle ratio can improve fuel economy by 4% (Gillis 1991).

Changes in Gear Ratio

Automotive transmissions vary the ratio of engine speed to vehicle speed, allowing the

engine to operate in the optimal speed range and the automobile to operate over a wider

range of speeds. The wider, or taller, the ratio range of the gears in the transmission, the

more the engine can operate over a wide range of speeds and loads without sacrificing

performance. The VX operates at wider gear ratios and, thus, lower engine speeds than the

1991 and 1992 DX. This is made possible by the enhanced low-end torque resulting from

the use of variable-valve timing. The combination of axle and gear ratio changes accounts

for a 21% improvement in fuel economy (Harrington 1992).

Multi-point Fuel Injection

Fuel injection systems provide more control over addition of fuel and more complete fuel

atomization than carburetors. Such systems result in improved fuel economy, lower

emissions, and increased power. The 1991 Civic DX is equipped with a dual-point fuel

injection system using two injectors to inject fuel at essentially the same place as from a

carburetor. This system has been replaced by multi-point fuel injection in the 1992 Civics.

One injector is used for each cylinder (four cylinders in the case of the Civic hatchbacks)

Page 21

and fuel is injected upstream of the intake valves. Multi-point fuel injection allows control

of the air/fuel ratio at each cylinder and results in improvements in power, fuel economy,

and emissions. It is estimated to provide a 1.5% improvement in fuel economy over dual-

point fuel injection (Harrington 1992).

Weight Reduction

Lighter vehicles require less energy to overcome inertial forces. The 1992 Civic VX is

about 84 pounds (4%) lighter than the 1992 DX and 64 pounds (3%) lighter than the 1991

DX due to the use of lightweight alloy wheels, a lighter engine block, and other minor

modifications (Honda Motor Co. Ltd 1991). This weight reduction results in a 2.5%

increase in fuel economy relative to the 1991 DX (Harrington 1992).

Aerodynamic Improvements

Aerodynamic drag is due to the resistance of air to the movement of the vehicle. The

aerodynamic characteristic of a vehicle is generally expressed as the coefficient of drag, or

. The lower the C

, the less energy is required to overcome air resistance. The C

the 1992 DX is 0.32, compared with 0.33 for the 1991 DX, while the VX has a drag

coefficient of 0.31. This reduction in drag coefficient is estimated to produce a 1.5%

increase in fuel economy in the VX relative to the 1991 DX (Harrington 1992).

Low Rolling Resistance Tires

Rolling resistance results from heat generated and lost by tires as they flex. The 1992 VX

is equipped with tires that have reduced surface area in contact with the road and increased

stiffness, thus decreasing rolling resistance. Low rolling resistance tires improve fuel

economy by an estimated 1% (Harrington 1992). We have no data on braking or cornering

characteristics of these new tires compared to those used on the 1991 Civic VX.

Reduced Idle Speed

An engine that idles at higher than average rpm will generally consume more fuel than one

that idles at lower rpm. Honda has reduced idle fuel consumption by decreasing the speed

at which the VTEC-E engine idles, thus improving fuel economy by 3% (Harrington

1992).

Shift Indicator Light

Honda estimates that the shift indicator light, which alerts the driver to shift gears at the

most efficient shift point, will result in a 5% fuel economy improvement. The 49-State

Civic VX is equipped with a shift indicator light, while the California VX is not

(Harrington 1992).

Page 22

APPENDIX B: 1991 2-DOOR HATCHBACK COMPARED TO 1992 CX

This Appendix compares the 1992 Honda Civic CX 2-door hatchback with the 1991

Honda Civic 2-door hatchback. As shown in Table B.1, these two cars are functionally

identical, with the exception of an airbag and a shift indicator light in the 1992 CX, but

have efficiencies that differ by 28%. The efficiency difference is mainly caused by the shift

to a 5-speed transmission from a 4-speed transmission and improved aerodynamics. Table

B.2 presents the estimated direct emissions for these models.

After subtracting the cost of the airbag and correcting for 4% inflation (same assumptions

as Table 5 above), we find that these efficiency improvements are accomplished at

approximately zero cost. The efficiency of this Civic hatchback has been improved at low

or zero cost to society, while actually improving safety. This comparison adds weight to

the previous calculations for the DX and VX.

Table 1: Specifications/Features of Honda Civic Models

Specifications/Features 1991 DX 1992 DX 1992 VX

Fuel Economy

Unadjusted miles per gallon (city/hwy) 34/39 39/44 53/61

Adjusted miles per gallon (city/hwy) 31/35 35/40 48/55

Adjusted miles per gallon (composite) 32.7 37.1 50.9

Engine, Drive Train

Horsepower (@ rpm) 92 @ 6000 102 @ 5900 92 @ 5500

Torque (lb-ft @ rpm) 89 @ 4500 98 @ 5000 97 @ 4500

Valve train SOHC, 16-valve SOHC, 16-valve VTEC-E

Fuel induction Dual-point Fuel Injection Multi-point Fuel Injection Multi-point Fuel Injection

Drive-train type Front-wheel Drive Front-wheel Drive Front-wheel Drive

Transmission 5-Speed Manual 5-Speed Manual 5-Speed Manual

Final drive train ratio 3.89 4.06 3.25

Exterior Dimensions

Wheelbase (in) 98.4 101.3 101.3

Overall Length (in) 157.1 160.2 160.2

Overall Width (in) 66.3 66.9 66.9

Curb weight (lbs) 2158 2178 2094

Coefficient of drag 0.33 0.32 0.31

Interior Dimensions

Headroom front/rear (in) 38.2/36.6 38.6/36.6 38.6/36.6

Legroom front/rear (in) 38.6/36.6 42.5/30.5 42.5/30.5

Cargo volume (cu. ft) 16.9 13.3 13.3

Passenger volume (cu. ft) 73 77.2 77.2

Fuel capacity (gal) 11.9 11.9 10

Power features

Steering no no no

Windows no no no

Safety features

Driver airbag not available standard standard

Cost (1992 $)

Invoice/dealer cost 8171 8663 9258

Manufacturers suggested retail price (MSRP) 9563 10140 10840

Performance

Seconds to go from 0 to 100 kph NA 10.2 10.5

(1) Sources: Honda 1990, 1991; Leestma 1992; USAA 1991a, 1991b

(2) 1991 costs adjusted to 1992 $ assuming 4% inflation.

(3) Fuel economy is listed for the 49-State version of the 1992 VX. The California version has the following fuel economy:

unadjusted: 49/57; adjusted: 44/51; composite: 46.9. The California version of the 1991 and 1992 DX has the same

fuel economy as the 49-State versions of these cars.

(4) Unadjusted mpg is used for CAFE compliance purposes and does not include real-world corrections to the EPA test

procedure. To calculate adjusted mpg that reflects real-world driving, unadjusted mpg for city driving is reduced by 10% and fo

highway driving is reduced 22%. Composite mpg assumes 55% of driving is urban and 45% of driving is on the highway.

(5) Gear ratios for the 1992 DX and VX are as follows (this data was unavailable for the 1991 DX):

Gear number 1 2 3 4 5 R

Ratio 92 DX 3.25 1.761 1.172 0.909 0.702 3.153

Ratio 92 VX 3.25 1.761 1.066 0.852 0.702 3.153

Page 23

Table 2: Cosmetic Differences and Associated Costs

Cost to add feature

1991 DX 1992 DX 1992 VX (1992$) (2)

Rear wiper/washer yes yes no 300

Body side molding yes yes no 150-160

Tachometer no no yes 150-300

Adjustable steering column yes yes no 0 (3)

Cargo area cover yes yes no 159

Wheel type steel covers center caps lightweight alloy 240-320 (4)

MSRP correction added to DX (5) 365

MSRP correction added to VX (5) 614

(1) Sources: American Honda Motor Co., Inc. 1990, 1991; Maio 1992.

(2) Figures represent estimated MSRP costs of adding the specified features. Estimates are in some cases crude because

these particular items are not available as actual options (with the exception of the cargo area cover, which is available

as an option on the VX).

(3) Cost to replace steering column (as a repair) = $272 for both DX and VX, according to Maio 1992b.

The incremental cost therefore is 0 for tilt steering column in the DX, since there is no difference in cost to

replace the column between DX and VX.

(4) Indicates cost of lightweight alloy wheels (4) above that of steel covers or center caps.

(5) To correct for differences in costs of cosmetic features, the mean cost of each option that exists on the 1991

and 1992 DX but not on the VX has been added to the cost of the VX, and the mean cost of each option that

exists on the VX but not on the DX has been added to the cost of the DX. The only exception to this rule is that only

half the cost of the alloy wheels has been added to the cost of the DX, because part of their benefit is to increase fuel

economy, and part is cosmetic. These MSRP costs are adjusted to reflect the standard 17% markup when estimating

invoice costs. See Table 5 for details on how these numbers are used in the CCE calculations.

Page 24

Table 3: Estimated direct emissions for Honda Civic hatchbacks

Pollutant (g/mi)

Vehicle Applicability HC CO NOx Comments

1991 DX 4k mile certification data 0.091 0.90 0.34 50 State

1992 DX 4k mile certification data 0.100 0.96 0.20 49 State

4k mile certification data 0.130 1.60 0.20 CA

1992 VX 4k mile certification data 0.152 0.70 0.54 49 State

4k mile certification data 0.155 0.95 0.60 49 State w/SIL (1)

4k mile certification data 0.140 0.90 0.20 CA

1991 DX Deterioration factors 1.247 1.260 1.129

1992 DX Deterioration factors 1.243 1.292 1.453

1992 VX Deterioration factors 1.205 1.268 1.000

1991 DX Estimated 50k mile emissions (2) 0.11 1.1 0.38 50 State

1992 DX Estimated 50k mile emissions 0.12 1.2 0.29 49 State

Estimated 50k mile emissions 0.16 2.1 0.29 CA

1992 VX Estimated 50k mile emissions 0.18 0.89 0.54 49 State

Estimated 50k mile emissions 0.19 1.2 0.60 49 State w/SIL

Estimated 50k mile emissions 0.17 1.1 0.20 CA

(1) SIL= shift indicator light

(2) Deterioration factors are multiplied by 4k mile emissions to calculate 50k mile emissions.

Deterioration factors are derived from testing of prototype vehicles by EPA.

(4) Emissions represent direct tailpipe emissions and do not include indirect emissions from the extraction,

processing, and transport of fuel.

(5) Sources: American Honda Motor Co, Inc., Certification Department, 1991 EPA Test Car List, US EPA

Federal Certification Test Results for 1991 Model Year, and US EPA Federal Certification Test Results

for 1992 Model Year.

Page 25

Table 4: Technologies Used to Increase Fuel Economy in 1992 VX

Fuel Economy

Improvement (%) Cost

Technology '91 DX to '92 VX (1992 $/car) (2,3)

Multi-point fuel injection 1.5 56-162

Low rolling resistance tires 1 21-22

VTEC-E engine

variable valve timing 2.5 108 -164

lean burn 5 -10 150 - 500

reduced friction 1.5 35-65

roller cam followers 1 19-54

Weight reduction 2.5 37 - 78 (4)

Aerodynamic improvements 1.5 22 - 39 (5)

Gearing and drive ratio changes 21 N/A (6)

Reduced idle speed/rpm 3 N/A (6)

Shift indicator light 5 N/A (6)

Total 45.5 - 50.5 (7) 448 - 1084

(1) Sources: Greene and Duleep. 1992, Harrington 1992, National Research Council 1992,

SRI International 1991.

(2) All costs taken from SRI International (1991) and Greene and Duleep (1992). They represent retail

costs to the consumer. Greene and Duleep provide the low end of the range and SRI provides the

high end estimate for all technologies with the exception of variable valve timing. Both sources

used a variety of information including cost figures from vehicle manufacturers and component

suppliers, and information on cost components such as production costs, fixed costs, and

markups for overheads, taxes, and dealer profit.

(3) Most cost estimates adjusted from 1988 and 1990 $ based on 4.1% implicit price deflator

for GNP for 1989 and assumed 4% annual deflator for 1990 to 1992.

(4) Cost estimate from Greene and Duleep based on $0.50/lb reduced (1988$). Estimate from

SRI based on 5% weight reduction.

(5) Cost based on 10% aerodynamic improvement.

(6) N/A = not available.

(7) Totals based on simple addition do not add to 56% due to synergistic effects of fuel

economy technologies (e.g., variable valve timing allows gearing changes and use of lean burn).

Page 26

Table 5: Cost of Conserved Gasoline for 1992 Honda Civic DX and VX Hatchbacks

Changes in mpg, fuel use, and capital costs

Costs Costs Costs Costs

Fully Corrected Fully Corrected As Available Fully Corrected

91 DX 92 DX 92 VX 91DX to 92DX 91DX to 92VX 92DX to 92VX 92DX to 92VX

EPA mpg estimates

Adjusted miles/gallon (city) 31 35 48 13% 55% 37% 37%

Adjusted miles/gallon (highway) 35 40 55 14% 57% 38% 38%

Adjusted miles/gallon (EPA composite) 32.7 37.1 50.9 13% 56% 37% 37%

Fuel used (gallons/year) 312 275 200 -37 -112 -75 -75

Invoice cost (IC, in 92$) 8171 8663 9258 492 1087 595 595

MSRP cost (92$) 9563 10140 10840 577 1277 700 700

IC adjusted for airbag+cosmetic difs (92$) 8474 8282 9084 -192 610 727 802

MSRP adjusted for airbag+cosmetic difs (92$) 9928 9705 10654 -223 726 859 949

Annualized incremental invoice cost ($/year) 999 976 1071 -23 72 86 94

Annualized incremental MSRP cost ($/year) 1170 1144 1256 -26 86 101 112

CCE based on invoice cost (92 $/gallon) < 0 0.64 1.15 1.26

CCE based on MSRP cost (92 $/gallon) < 0 0.77 1.36 1.50

SPT (in years)-MSRP & gas price w/tax < 0 4.6 8.2 9.0

SPT (in years)-MSRP & gas price w/o tax < 0 5.9 10.4 11.5

Other parameters

Real discount rate 7%

Auto lifetime (years) 13.3

Capital recovery factor 11.8%

City driving percentage 55%

Highway driving percentage 45%

Miles driven/year 10200

Invoice cost of airbag (1992 $) 683

MSRP cost of airbag (1992 $) 800

Levelized cost of gasoline w/taxes (92$/gal) 1.40

Levelized cost of gasoline w/o taxes (92$/gal) 1.10

(1) 1991 DX costs adjusted to 1992$ assuming 4% inflation.

(2) Source of invoice and MSRP costs: USAA 1991a, 1991b.

(3) Automobile lifetime derived from retirement curve in Davis and Morris (1992).

(4) Composite mpg calculated assuming city and highway percentages are 55% and 45%, respectively (EPCA 1975).

(5) Annual auto mileage from Davis and Morris (1992).

(6) MSRP airbag cost from Maio 1992. Invoice cost of airbag calculated from MSRP using average markup of 17% (from total Civic costs).

(7) Levelized cost of gasoline calculated using a 7% real discount rate and the fuel price forecast contained in U.S. DOE 1992 over the

period 1992-2005, based on the method from Kahn 1988. This price includes roughly $0.30/gallon of state and federal taxes.

(8) Cost of airbag subtracted from 1992 DX and VX models.

(9) Mean cost of hatch cover, body side moulding, adjustable steering column, and rear wiper/washer added to cost of VX in Full

Correction case. Mean cost of tachometer and 1/2 of cost of alloy wheels added to cost of 1991 and 1992 DX. Invoice cost for options

calculated from MSRP costs in Table 2 using same markup as for airbag (see note 6). In the As Available case, only the cost of

the hatch cover is added to the VX, because that is the only option that can actually be purchased by a new car buyer.

(10) no rebound effect is included in cost-effectiveness calculations. See text for details

(11) SPT = simple payback time (in years), defined as incremental capital cost divided by annual energy cost savings

Page 27

Table 6: Sensitivity of Cost of Conserved Energy to Choice of Real Discount Rate

Levelized Fully Corrected As Available Fully Corrected

Real gasoline CCE CCE CCE

discount price 1992 $/gallon 1992 $/gallon 1992 $/gallon

rate 1992$/gal 91 DX vs 92 VX 92 DX vs 92 VX 92 DX vs 92 VX

CCE based on invoice cost (1992 $/gallon) 3% 1.411 0.50 0.90 0.99

CCE based on MSRP cost (1992 $/gallon) 3% 0.60 1.06 1.17

CCE based on invoice cost (1992 $/gallon) 7% 1.404 0.64 1.15 1.26

CCE based on MSRP cost (1992 $/gallon) 7% 0.77 1.36 1.50

CCE based on invoice cost (1992 $/gallon) 10% 1.398 0.76 1.35 1.49

CCE based on MSRP cost (1992 $/gallon) 10% 0.90 1.60 1.77

CCE based on invoice cost (1992 $/gallon) 30% 1.364 1.69 3.01 3.32

CCE based on MSRP cost (1992 $/gallon) 30% 2.01 3.56 3.93

(1) Assumptions for auto lifetime, mileage travelled, and other parameters are the same as in Table 5.

(2) Levelized cost of gasoline calculated using appropriate real discount rates and the fuel price forecast contained

in U.S. DOE 1992 over the period 1992-2005, based on the method from Kahn 1988.

Page 28

Table B.1: Cost of Conserved Gasoline for 1992 Honda Civic CX Hatchbacks

Changes

1991 2 door hatchback 1992 CX hatchback 1991 to 1992CX

EPA mpg estimates

Adjusted miles/gallon (city) 33 42 27%

Adjusted miles/gallon (highway) 37 48 30%

Adjusted miles/gallon (EPA composite) 34.7 44.5 28%

Fuel used (gallons/year) 294 229 -65

Characteristics 1992 CX rel. to 1991

Horsepower 70.0 70.0 same

Transmission 4 speed manual 5 speed manual +

Airbag No Yes +

Engine 4 cylinder, 1.5 liter 4 cylinder, 1.5 liter same

Shift indicator light No Yes

Curb weight 2127.0 2094.0 -

Overall length 157.1" 160.2" +

HC emissions (g/mi) 0.208 0.112 -

CO emissions (g/mi) 1.73 1.52 -

NOx emissions (g/mi) 0.49 0.28 -

Invoice cost (IC, in 92 $) 6641 7290 649

MSRP cost (92 $) 7379 8100 721

Invoice cost adjusted for airbag (92 $) 6641 6570 -71

MSRP cost adjusted for airbag (92 $) 7379 7300 -79

Annualized incremental invoice cost ($/year) 783 774 -8

Annualized incremental MSRP cost ($/year) 870 860 -9

CCE based on invoice cost (92 $/gallon) < 0

CCE based on MSRP cost (92 $/gallon) < 0

Simple payback time-MSRP & gas price w/tax < 0

Simple payback time-MSRP & gas price w/o tax < 0

Other parameters

Real discount rate 7%

Auto lifetime (years) 13.3

Capital recovery factor 11.8%

City driving percentage 55%

Highway driving percentage 45%

Miles driven/year 10200

Invoice cost of airbag (1992 $) 720

MSRP cost of airbag (1992 $) 800

Levelized cost of gasoline w/taxes (92$/gal) 1.40

Levelized cost of gasoline w/o taxes (92$/gal) 1.10

(1) Assumptions are the same as for Table 5, with the addition that there are no cosmetic differences between the 1991

hatchback and the 1992 CX hatchback.

(2) Emissions factors are estimated 50k mile values, calculated using method described in Table 3.

Page 29

Table B.2: Estimated emissions for 1991 base model Honda Civic

hatchback and 1992 CX (1)

Pollutant (g/mi)

Vehicle Applicability HC CO NOx Comments

1991 Base Htchbk 4k mile certification data 0.208 1.73 0.49 50-State

1992 CX 4k mile certification data 0.112 1.52 0.28 50-State w/ SIL (2)

4k mile certification data 0.078 0.85 0.32 50-State

1992 CX Deterioration factors 1.184 1.295 1.129

1992 CX Estimated 50k mile emissions (3) 0.13 2.0 0.30 50-State w/SIL

0.092 1.1 0.34 50-State

(1) Emissions represent direct tailpipe emissions and do not include indirect emissions from the

extraction, processing, and transport of fuel.

(2) SIL= shift indicator light

(3) Deterioration factors are multiplied by 4k mile emissions to calculate 50k mile emissions.

Deterioration factors are derived from testing of prototype vehicles by EPA.

(4) Sources: American Honda Motor Co., Inc., Certification Department; 1991 EPA Test Car List;

US EPA Federal Certification Test Results for 1991 Model Year; and US EPA Federal Certification

Test Results for 1992 Model Year.

Page 30