The Corporate Average Fuel Economy or CAFE is a set of regulations set by the US Congress dictating the average fuel economy for car manufactures across their model line. In theory, this is supposed to drive manufacturers to develop cars with better fuel economy but in practice it drives a lot of them to develop intuitive ways to get around the regulations.
The latest set of regulation is called CAFE 2025 and it entails a new standard of 54.5 MPG for new cars and trucks by 2025. When the announcement was made in 2011, most of the large automakers in the world joined President Obama and pledged for increases in efficiency for their vehicles but many had their fingers crossed behind their back.
The most famous case of how the standards can be cheated started with the C4 Corvette. At the time GM was trying to get the Corvette to show better fuel economy so they implement something called "Skip Shift". The way that skip shift works is that GM added a solenoid to the six speed manual transmission that would force the driver to shift from first gear to fourth gear if they were accelerating at a slow rate of speed from a stop. This effectively cheated the CAFE test that is supposed to be run in gears one thru three as it forced the tester to go to 4th gear and effectively get better city mpg ratings due to the lower RPM's. This small increase was enough to allow GM to avoid the gas guzzler tax.
The skip shift solenoid exists even today in the C7 Corvette Stingray but even GM knew that they needed to make it easy for owners to get around it so they featured a page in the owners manual that sarcastically stated not to disconnect a set of wires or the skip shift would no longer function. Along with GM's suggestion, there are people that have come up with a resistor that can be setup in place of the solenoid for less than $10 that will disable the function and not set a fault code.
Another example of clever modification comes from Chrysler and the PT Cruiser. The PT Cruiser was basically an oversize Dodge Neon and used most of the same drive train and suspension but came in a retro wagon shape. The PT Cruiser should have been part of the same category as the Neon but Chrysler decided to make the rear seat removable to have the majority of the vehicle be cargo capacity and along with some lobbying was able to convince the EPA that the PT Cruiser was actually a light truck. This allowed it not to drag down the compact or midsize categories it should have belonged to and actually improve their truck category as it now averaged in with models like the Dodge Ram and Durango.
The Subaru Baja was based on the Subaru Legacy and Outback and shared a majority of the components but due to the cargo bed that was on the back of the Baja it was able to be classified as a light truck and not a passenger car. This put the Baja at lower requirement level and allowed it to have a more powerful engine at the time. The Baja and other vehicles like it get classified as light trucks all the time because there is a group requirements for that category and only one of them has to be met to qualify. The easiest one that manufacturers go for is the rear seat rule and all it stated is that the rear seats must be completely removable and offer a flat cargo area. The one that the PT Cruiser and Baja exploited goes along with this as well as the other rule which states that there must be more cargo are than passenger area.
Manufacturers are developing more fuel efficient vehicles but a lot of that is driven by competition and the CAFE standards stand mostly in the way. The standards date back to the late 70s and have been updated a few times but are still fairly easy to get around. The standards make a lot of people feel warm and fuzzy and like they are helping the environment but in the end the main factor that drives fuel efficient development is the consumer.