Kingdom of Saudi Arabia KSA Fuel Economy Regulations

Kingdom of Saudi Arabia (KSA) Fuel Economy Regulations

U. S. CAFE & KSA Fuel Economy Background • CAFE standard footprint curves were based on the mix of vehicles sold in U. S. • KSA consumers demand a different mix of vehicles. • CAFE has important flexibilities (e. g. , FFV, A/C, off-cycle, etc. ) that were not adopted by KSA. • KSA provided a 4 year offset which is directionally helpful – but does not cover mix differences and lack of flexibilities. 2

U. S. CAFE & KSA Fuel Economy Flexibilities / Penalties Flexibility CAFE KSA Credits Carry Forward / Back +5 years, -3 years +5 years, -1 year Early Credits 3 Years (started in 2009 for 2012 program) None Car/Truck Trading Capped Unlimited (8 truck credits = 10 car credits) FFV Credits 1. 2 mpg cap (0. 5 km/liter) None Off-Cycle Credits Start in 2017 MY None A/C Credits Start in 2017 MY None HEV/PHEV/BEV Benefits Petroleum displacement factor for CAFE None Non-compliance penalty Manufacturer trading allowed, financial penalties Non-compliant products cannot be sold if 1 year carry-back doesn’t close gap 3

U. S. CAFE & KSA Fuel Economy Example Different Mix of the Same Vehicles = Different Fleet Fuel Economy U. S. Fleet Compliant (with Flexibilities) KSA Fleet Non-Compliant (even with Four Year delay) • These fleets are made up of the same vehicles (same footprint and fuel economy). • The size of bubbles is proportional to sales. • The mix and flexibilities have changed making U. S. fleet compliant and KSA fleet non-compliant. 4

U. S. CAFE & KSA Fuel Economy Summary • We will continue to work with KSA to resolve the regulatory impact of market mix differences to ensure a successful program. Recommendation - Modify the U. S. CAFE curves (still to begin in MY 2016) to account for U. S. to Saudi Arabia Market Average Fuel Economy Differences • Shift the U. S. 2012 -2025 car and truck curves down by 2. 9 km/l to account for the regional fleet mix and consumer preference differences. • The shifted curve would be an offset to existing curve (i. e. , operate in the same fashion not requiring any modification to the program structure). 5

Options That Could Add Longevity to Program • Delay in light truck implementation: In the global markets, effective dates for trucks are often started at a later point in time than car standards (e. g. , CO 2 regulation in the EU is delayed two years for light commercial vehicles). • Delay start of the program: Delay implementation of the requirements from the proposed start in MY 2016 until MY 2018. • Exclusion of passenger vehicles with 3 seating rows or more: (or a 20% target relief in stringency) for vehicles that offer more mobility. • 5 -Year Offset: Start the program with the FE target curves from the U. S. program as applied in 2011 (a 5 year curve offset) rather than 2012 (4 year offset). • Recognition of U. S. Flexibilities: Recognition for vehicle improvements that; allow flexible fuel operation, improve A/C systems, and/or recognition of technologies that achieve real-world benefit that is not captured on U. S. drive cycles. 6