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Obama fuel plan would raise car prices, study says

By Bernie Woodall

DETROIT (Reuters) - The average cost of a car sold in the United States could rise by just over 20 percent and more autoworkers would lose their jobs if regulators institute the Obama administration's most aggressive targets for increasing fuel economy, a study released on Wednesday said.

The study, released by the Ann Arbor, Michigan-based Center for Automotive Research, said it would add about $6,400 on average to the cost of new vehicles if the U.S. government sets a mandate for an average fuel economy of about 60 miles per gallon by 2025.

In addition, setting the target for fuel economy at that level would prompt Americans to hold on to used cars for far longer, costing more than 220,000 auto manufacturing jobs as new car sales dwindle, the study said.

The U.S. government is setting fuel economy standards that will take effect in 2017.

The U.S. auto industry has rallied against scenarios outlined by the Environmental Protection Agency and the Department of Transportation to reduce the emissions of greenhouse gases, which scientists link to global warming.

The Center for Automotive Research, which gets money from the auto industry, said the Obama administration proposals would cost consumers and shut down production, squeezing out jobs at auto manufacturers and their suppliers.

"Let's not kid ourselves," said Sean McAlinden, chief economist for CAR,

The new steps being considered by U.S. regulators come after steps adopted in April that target an increase in the average fuel economy of cars to 34 miles per gallon by 2016.

The average additional cost to a vehicle will be about $4,200 if fuel economy is 42 miles per gallon, about $5,200 if automakers must meet a 50 miles-per-gallon average and $6,400 for a 60 miles-per-gallon average, CAR said.

The average vehicle sold for about $30,000 in November, according to TrueCar.com.

The study was based on estimates for the cost to automakers to roll out technologies to improve fuel economy ranging from improvements to gasoline engines to hybrids and pure electric cars.

It assumed that Americans would continue to buy trucks and SUVs in the same proportion, at roughly half of the market.

CAR said if the U.S. auto industry were forced to meet a standard for an average of 60 miles per gallon for new vehicles by 2025, about 22 percent of auto manufacturing jobs will be lost, or 222,000 jobs.

Including lost supplier jobs would increase that figure to 1.3 million jobs, the study said.

It said U.S. auto sales would be held at 13.4 million vehicles in 2025, about a quarter less than they would be otherwise at that time under the most aggressive fuel economy proposals.

That would cost the auto industry $62 billion in annual revenue, according to the projection.

McAlinden said that sharp an increase in fuel efficiency standards could create a "Cuban auto syndrome," in which American consumers hang on to cars for decades.

The average car on the road in the United States was just over 10 years old in 2009.

(Reporting by Bernie Woodall. Editing by Robert MacMillan)

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