I hear what you're saying, but it wont work because the automakers are ALREADY taking a loss on the fuel efficient cars as it is thanks to the CAFE problems.

CAFE is a federal mandate on the automakers to meet minimum fuel economy standards when averaged across all the cars they will build that year (though they currently have different numbers for cars vs. trucks).

As a result of CAFE, economy cars that get high mileage are technically SOLD AT A LOSS! (I'm guessing most consumers don't know this). The manufacturer takes this loss on one individual car because it drives the fleet's average fuel economy numbers up helping the automaker beat their mandated average. This, in turn, allows the manufacturer to now sell a gas guzzler, which is sold at a profit which more than offsets the loss they took on the economy car.

Unfortunately, during economic downturns or when the price of gas is sky high (as it is now), consumers are forced to rethink their buying habbits (when money is not a factor, most any consumer will buy a gas guzzler over a economy car). This means that the automaker sells disproportionately more economy cars (in which they suffer a financial loss) than gas guzzlers (which was how they had planned to make up for the loss -- but those cars aren't selling).

By throwing plug-in technology into the cars, the price to engineer and build will only go higher, which the consumer will not agree to pay, forcing the maker into even more of a loss.

Unfortunately CAFE standards only incent the makers to 'meet' their mandated numbers... they are NOT incented to do even better; they are punished if they do better.

Finance guys have to calculate what sort of price needs to be charged for a car in order to drive its sales figures either up or down (yes, they might actually want to drive it down). Since they're selling the car at a loss but they are, after all, in business to try to make a profit... they try to minimize the losses and maximize the profits. Once they've sold enough economy cars to hit their numbers, they frankly DO NOT want to sell any more of them because that would just increase their losses (remember, those cars are sold BELOW what they cost to produce). If they can drive up the sales of the profitable cars (which hurt their CAFE numbers) then they'll try to boost the sales of the economy cars, but ONLY enough to bring the CAFE numbers back in line.

Now... what would happen if instead of the automaker having to play the price games, we put the CAFE standards directly onto the consumers? We could either do this in the form of a one-time tax or rebate (the tax would get more expensive as the fuel economy of the car was poorer), neutral for cars that meet the desired standard, and would be a government tax rebate for cars that exceed the desired economy standards (proportionate to how much they exceed the standard). It could also be imposed as part of the annual license plates or tags, but that's a state level and CAFE is a federal standard.

I think this would have two impacts

#1 Consumers would directly recognized that they are being "fined" for buying an inefficient car. They would rethink whether they want to pay a hefty tax (possibly an annual recurring tax) or collect a nice rebate.

#2 Since the manufacturers would no longer have to play pricing games, all cars could be sold at a profit (instead of some at a loss and others at a profit). This would mean that the manufacturer is happy to sell consumers _ANY_ car. If everyone wants a car that gets 60mpg, then the makers would be happy to churn them out.

Market fluctuations (like the price of gas) that drive consumers into a different category of cars wouldn't actually hurt the manufacturers.

I think the main reason that congress & senate do NOT like the idea of charging consumers directly (they prefer to hide behind the CAFE game and try to make the auto makers look like the bad guys) is because consumers would resent these fees and that doesn't necessarily help them when they're up for re-election.

Consumers already pay these fines or collect these rebates today -- they just don't know it. When you buy an economy car, the low price of your car was actually due to a subsidy (think of this as your 'rebate') from someone who unknowingly paid a very high profit margin (think of this as their 'tax') when they bought a gas guzzler.

Consumers actually believe that economy cars are cheap to build and luxury cars are expensive to build. But most of the cost of the car is in the research, engineering, testing, production engineering, safey, health care costs, etc. required to bring that car from concept to reality. The actual material that goes INTO the car and the amount of time (and the number of people assembling the car on the production line) are actually NOT substantially different when you compare a luxury car to an economy car. Yes, the luxury car does technically have more raw materials and might require a little more assembly, but when you consider that you can get an economy car for less than $15000 and almost no luxury car costs less than $30000 there is absolutely no way the luxury car costs double (or more if you think about luxury cars in the $50,000+ market) to build.