Why fuel-efficient cars are better for the economy and the earth

[Editor's note: NRDC's Roland Hwang writes that better fuel economy is boosting car sales. A new report released Thursday by Citi Investment Research and Analysis and Ceres backs him up: It estimates that higher MPG requirements will hike U.S. automakers profits by 6.3 percent, or $2.44 billion, in 2020.]

When it comes to consumer demand for fuel-efficient cars, there is no denying the sales data and the automakers' own words. The bottom line, according to Mark Fields, president of Ford, is that "people want vehicles that get better fuel economy." And Bob Carter, Toyota vice president of U.S. sales, said: "Fuel economy remains a top purchase consideration among consumers."

With gasoline prices over $4 gallon in many parts of the country, consumers are flocking to fuel-efficient cars and giving a jolt to sales of electric cars. And thanks to stronger standards, the U.S. automakers are much better prepared, and indeed thriving, in the light of the latest surge in oil prices.

In March, the Detroit three all posted sales gains: GM 12 percent, Ford 5 percent and Chrysler 34 percent. And in their own words, fuel-efficiency is driving these sales increases.

GM sales of fuel-efficient vehicles hits record

March was a record month for sales of high fuel-economy vehicles for General Motors.

GM said Monday that its 12 vehicles getting 30 mpg or better on the highway had combined U.S. sales of 100,000 or more for March -- a new record for the company. According to Mark Reuss, president of GM North America:

"Three years ago, about 16 percent of the vehicles GM sold achieved at least 30 mpg on the highway. Today, that number is about 40 percent and we have more new fuel-economy leaders on the way."

Ford says fuel efficiency is "spurring" new sales

Like G, Ford is seeing the benefits of fuel-efficient cars being translated into more sales. According to Mark Fields:

"Higher gas prices are spurring people to buy vehicles because they want vehicles that get better fuel economy."

Chrysler "high fuel prices encouraging" sales

Chrysler is back on its feet with new models that are more fuel-efficient than their previous generation. In Chrysler's own words, Reid Bigland, CEO of the Dodge Brand and head of U.S. sales says:

"The combination of credit availability, an improving economy, pent-up demand and even high fuel prices encouraging people to acquire newer, more fuel-efficient vehicles are all helping to drive industry sales. Thanks to these factors, we experienced sales strength across the board.

Hybrids and electric vehicles sales jump

Toyota sold a whopping 28,711 Prius hybrids in March, another monthly historical record. Fully prepared to meet the demand for the hybrid model that was once considered fringe, Toyota sells four different Prius models: the original hatchback, a wagon version, a subcompact, and a plug-in version.

Take note: Prius outsold the popular affordable Corolla model in March. Given brisk first-quarter sales, Toyota on track to meet a goal of 220,000 Prius sales in the U.S. this year, up from 136,463 in 2011

And the favorite target of the right-wing media, the Chevy Volt plug-in hybrid, had a huge month, hitting a monthly record high of 2,289 units in March 2012. That's a 90 percent from February 2012 and nearly 300 percent increase from January.

Fuel efficiency driving job growth

Over the past five years, Ford has doubled the size of its team working on fuel-saving technologies, now has more than 1,000 engineers working on hybrid and electrification programs, and plans to double its workforce dedicated to better fuel economy. Again, according to Mark Fields, fuel efficiency will continue to drive job growth at Ford:

"To meet growing demand for our fuel-efficient vehicles, we are continuing to invest in new jobs in the U.S. and converting our facilities for further advancements."

And record monthly sales of the Chevy Volt hybrid electric plug-in car in March is putting workers put on the production line at GM's Detroit Hamtramck plant one week early, according to the United Auto Workers.

So what's so crazy about 54.5 mpg increasing auto industry profits?

March sales growth shows fuel efficiency, sales, profits and jobs, all go hand-in-hand. This is exactly the same conclusion that a new report by Citi Investment Research and Analysis in collaboration with Ceres reaches when looking at the impact in 2020 of the 54.5 mpg standard for 2025.

Citi and Ceres conclude that the industry as a whole will also likely see big profits, earning a 5.3 percent increase in profits of $4.76 billion in 2020. American automakers will likely enjoy the biggest percentage increase in profits (6.3 percent), pulling in an extra $2.44 billion dollars in 2020 under the standards.

March sales demonstrate that higher fuel efficiency can drive sales growth. In turn increased sales can drive profits and auto jobs. Drivers have more money in their pockets to spend on other goods. We send billions of dollars less on importing oil.

No doubt, the level of consumer demand for fuel-efficiency will continue to rise and fall with oil prices. But any automaker which bets against continued price volatility and builds their business plans around the return of cheap oil...well, to put in mildly, that's just bad business sense.

The price spikes of 2007 and 2008 bankrupted two of three domestic automakers. Fortunately, stronger fuel-efficency standards takes any remaining guesswork out of the hands of the automakers about oil prices.

The bottom line: fuel efficiency means a stronger economy, a healthier environment, and more energy secure America.

This article originally appeared on the NRDC's Switchboard blog, and is reprinted with permission. Visit NRDCs Switchboard Blog

Ford Fusion Hybrid photo courtesy of Ford.