Reuters Summit - How to boost fuel efficiency? Raise taxes - execs

By Scott Malone

DETROIT (Reuters) - There's a simple way to get Americans to drive fuel-efficient cars, according to auto executives, but they are not going to like it -- sharply hike the gas tax.

While politically unpalatable, gasoline that costs at least $4 a gallon would have a far greater effect on American fuel usage than Washington's $25 billion loan program meant to spark investment in new technologies, executives told the Reuters Autos Summit in Detroit.

Consumer demand for fuel-efficient cars like Toyota Motor Corp's Prius and Ford Motor Co's Escape hybrid surged last summer as gasoline prices soared above $4 a gallon.

But with the pressure off -- the average U.S. retail gas price was $2.66 a gallon at the end of October, according to the benchmark Lundberg survey -- Americans are once again buying fuel-hungry sport utility vehicles and other large cars.

"The U.S. allows the price of gasoline to go back and forth across this line where the consumers don't care about fuel efficiency and where consumers do care about fuel efficiency," Mike Jackson, chief executive of AutoNation Inc, the No.

1 U.S. auto retailer, told the summit in Detroit on Wednesday.

Gradually raising gas taxes to the point where fuel costs $4 to $5 at the pump will do more to stimulate demand in next-generation vehicles like General Motors Co's

forthcoming Chevy Volt plug-in hybrid than any other policy initiatives, including raising the national fuel efficiency standards know as CAFE, Jackson said.