Motor Vehicle Regulations

Although federal safety, emissions, and fuel economy regulations have yielded a wealth of benefits--everything from fewer highway deaths to cleaner air--manufacturers and consumers have paid a price. Federal agencies and the auto industry estimate regulatory costs by figuring component costs and then adding in the costs of manufacturer and dealer overhead and profit (markup) to arrive at the consumer cost. Government and industry cost estimates, however, often vary substantially. For example, the National Highway Traffic Safety Administration pegged the cost of a drivers'-side air bag at $220, while industry estimated it at about $500. This report examines (1) the methods that government and industry use to estimate the cost of proposed regulations, (2) the reasons for differences between federal and industry estimates, and (3) the extent to which federal agencies coordinate and exchange information on vehicle regulations.

GAO found that: (1) regulatory cost estimates made by federal agencies and the automobile industry differ in part because the two groups do not share much cost information; (2) cost differences also result because agencies set performance levels without specifying equipment design, since there is uncertainty about what the actual design, and therefore the final components, of the new system will be; (3) federal agencies and the motor vehicle industry use different data and assumptions on vehicle production volumes, manufacturer and dealer markups, and the cost of components; (4) agency methods for estimating fuel economy costs also differ, and the National Highway Transportation Safety Administration (NHTSA) estimates the consumer cost of several options for improving fuel economy while the Department of Energy selects the options for improving fuel economy that it believes manufacturers will most likely implement and estimates a per-vehicle consumer cost based on those options; (5) federal agencies generally consider the potential interaction among safety emissions and fuel economy regulations, but they do not consider interactive costs or the total cost to industry in a given year; and (6) the Office of Management and Budget evaluates each agency's regulations individually and does not assess the overall impact or total costs of all regulations affecting one sector of the economy.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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