U.S. tells automakers they face no fuel economy penalties beginning with 2022 model year under new law - letter

U.S. tells automakers they face no fuel economy penalties beginning with 2022 model year under new law - letter

In a significant move for the automotive industry, the U.S. government has announced that automakers will face no penalties for failing to meet fuel economy standards beginning with the 2022 model year. This decision, part of the recently passed One Big Beautiful Bill, has far-reaching implications for both consumers and automakers.

The National Highway Traffic Safety Administration (NHTSA) had long required automakers to comply with the Corporate Average Fuel Economy (CAFE) standards, which mandated minimum average fuel economy targets across their fleets. However, the Trump administration’s new law has rendered these standards effectively powerless by slashing penalties for non-compliance down to $0 [1].

Aleksandra O’Donovan, head of electrified transport at research firm BloombergNEF, explained that without penalties, automakers have little incentive to meet the fuel economy targets. “If you don't have to do it, you won't be doing it,” she said, referring to the CAFE requirements [1].

The CAFE standards, originally signed into law in 1975, have been instrumental in reducing the country’s reliance on fossil fuels and encouraging the development of more efficient combustion engines. However, the increasing stringency of these rules has made them massively unpopular among many carmakers [1].

Automakers have long opposed CAFE standards due to the substantial penalties they faced for non-compliance. For instance, Stellantis paid $235.5 million in penalties for model year 2018 and 2019 vehicles, while General Motors paid $128.2 million in fines for model year 2016 and 2017 vehicles [1].

The elimination of penalties is expected to save automakers millions of dollars in fines. However, environmental organizations have warned that this move could discourage automakers from producing fuel-efficient cars or electric vehicles (EVs), potentially leading to increased tailpipe pollution and higher fuel costs for consumers [1].

Despite the nullification of penalties, analysts remain cautiously optimistic about the growth of EVs in the U.S. BloombergNEF has reduced its forecast for EV adoption in the U.S. from 48% of new car sales by 2030 to just 27%, but it still expects the broader industry to continue growing [1].

Automakers are global companies with interconnected supply chains, and fuel efficiency rules are still effective in major car markets like Europe and China. Therefore, it is unlikely that automakers will suddenly stop making fuel-efficient cars in the U.S. [1].

In conclusion, the U.S. government's decision to nullify fuel economy penalties for automakers starting with the 2022 model year has significant implications for both consumers and automakers. While it may save automakers millions in fines, it could also lead to increased tailpipe pollution and higher fuel costs for consumers. However, the growth of EVs in the U.S. is expected to continue, albeit at a slower pace than initially forecast.

References:

[1] https://insideevs.com/news/765944/cafe-fuel-economy-rules-dead-ev-sales/