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Some auto makers fear low gas prices mean consumers will turn up their noses at fuel-efficient vehicles such as hybrids and electric cars – technologies on which the industry is spending billions of dollars – if the price of gas stays low.The Associated Press

Auto makers in North America have a problem and it was evident in the $1.62 (U.S.) price of a gallon of gasoline at one station in the Motor City on Monday.

Yes, low gas prices provide a huge boost to sales of pickup trucks, big sport utility vehicles and large cars, which are the biggest sources of profit for the industry, especially the Detroit Three.

But some auto makers fear low gas prices mean consumers will turn up their noses at fuel-efficient vehicles such as hybrids and electric cars – technologies on which the industry is spending billions of dollars – if the price of gas stays low.

Some senior industry executives are beginning to push for a slowdown or relaxation in new fuel economy standards that will come into force in a decade.

"We can comply with the regulations; let's be clear, we can make a truck comply at a cost," Fiat Chrysler Automobiles NV chief executive officer Sergio Marchionne said Monday. "The question is whether we're willing to pay the price associated with those vehicles."

U.S. and Canadian regulations that come into force in 2025 will require auto makers to reduce emissions by raising the fuel economy of their vehicle fleets to 54.5 miles per gallon.

"There's a very strong argument that says that we should slow down the rate of introduction of these regulations," Mr. Marchionne said at the North American International Auto Show in Detroit.

Ford Motor Co. chairman Bill Ford also raised concerns, saying a review of fuel economy regulations later this decade should examine easing the rules or stretching out their implementation.

"It will be customer led," Mr. Ford said. "We can be there with the hardware, but we can't force it on the customers."

The economic payback of an electric car is five years at $4 a gallon when compared with an internal combustion powered vehicle that gets 30 miles a gallon, Morgan Stanley & Co. LLC auto analyst Adam Jonas said in a report. When gas costs $2, the payback period for the electric vehicle is extended to 14 years, Mr. Jonas wrote.

The divergent demands of better fuel economy regulations and customer desires for bigger and faster vehicles were underlined by some of the vehicle introductions at the Detroit show on Monday.

General Motors Co. started off the show by introducing two new versions of its hybrid electric Chevrolet Volt that will offer longer range during battery-powered driving than the current version of the car.

Next up was Nissan Motor Co. chief executive officer Carlos Ghosn, who unveiled a new version of the company's Titan full-sized pickup truck. Five hours later, Mr. Ghosn predicted to a group of international reporters that Nissan's battery-powered Leaf would post a double-digit sales increase in fiscal 2015.

Mr. Ford made his comments about new fuel economy standards while standing in front of a new Ford GT sports car that will get 600 horsepower and go into production next year.

One obvious answer is an increase in the U.S. gasoline tax to keep gas prices high and give drivers an incentive to buy fuel sippers.

Mr. Ford said he has been arguing for a higher gas tax for more than a decade, but there's no political support for such a move.

Auto makers need to co-operate more on projects so they can reduce the overall costs of meeting environmental goals, Mr. Marchionne said.

"If I had to design this industry with a clean sheet of paper, would any of us build separate four-cylinder engines to populate three million cars? The answer is no," he said.

"It's just excessive. We're spending too much money doing what we're doing."

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Morgan Stanley
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