American carmakers are opposing the Biden administration’s proposed fuel-efficiency plans for gasoline vehicles—a policy that is part of the administration’s plan to transition the United States into adopting electric vehicles.
In July, the National Highway Traffic Safety Administration (NHTSA) issued a proposal called the Corporate Average Fuel Economy (CAFE) standards which mandates that all new gasoline vehicles sold in the country have an average fuel economy of 58 miles per gallon (mpg) by 2032. As such, beginning in 2027, car manufacturers will be obliged to improve fuel efficiency by 2 percent annually for passenger cars and 4 percent per year for light trucks. The Alliance for Automotive Innovation is calling the proposal unreasonable and is seeking significant revisions to the policy, according to Reuters.
The NHTSA rule would raise average vehicle prices by $3,000 by 2032 due to penalties suffered by automakers for not being in compliance with the standards, the group said. This number “exceeds reason and will increase costs to the American consumer with absolutely no environmental or fuel savings benefits.”
On Monday, the American Automotive Policy Council (AAPC), a group representing Ford, General Motors, and Stellantis, warned that the proposal would “disproportionately impact the truck fleet.”
The group called on the NHTSA to halve the annual 4 percent fuel economy increase for light trucks to 2 percent. It pointed out that 83 percent of vehicles produced by Ford, General Motors, and Stellantis are trucks.
The proposed CAFE standard utilizes a new method for calculating fuel economy put forward by the U.S. Department of Energy.
The method greatly reduces EV fuel economy values used in calculating the CAFE compliance of automakers, thereby forcing automakers to either modify their gas-powered vehicles to remain compliant or shift to selling electric vehicles.
The new CAFE standards are part of the Biden administration’s climate agenda to expand electric vehicle use in the country by imposing stringent rules on fossil-fuel vehicles.
For instance, back in April, the U.S. Environmental Protection Agency (EPA) announced new rules aimed at cutting down greenhouse gasses and other pollutants in motor vehicle emissions.
The agency estimated that approving the rules will result in 67 percent of new passenger vehicles and light trucks being EVs by 2032. In addition, 50 percent of buses, 35 percent of short-haul freight tractors, and 25 percent of long-haul freight tractors are also estimated to become electric.
In comments filed with the federal government, Toyota and Stellantis called EPA expectations “overly optimistic.”
Toyota noted that “hundreds of new mines” will have to be set up globally to produce enough critical materials necessary to manufacture the electric vehicles needed to meet the EPA’s target of 67 percent.
Burdening Gas Vehicle Manufacturers
The CAFE standards were already raised by the Biden administration more than a year ago. During that update, the average fuel economy was raised to 49 mpg by model year 2026. Gas mileage was to be raised by 8 percent annually for model years 2024 and 2025 and 10 percent for model year 2026.A few weeks back, the AAPC wrote a letter to the U.S. Department of Energy, calling the estimated penalties for not meeting the new CAFE standards “alarming.”
The AAPC calculated that Ford, GM, and Stellantis would pay a combined $10.5 billion over a five-year period as penalties under the CAFE rules. General Motors would pay the largest penalty at $6.5 billion, followed by Stellantis at $3 billion, and Ford shelling out $1 billion.
“These penalty figures are alarming given that the combined total of all civil penalties paid in the approximately 50-year history of the CAFE program is approximately $1.5 billion,” the letter stated, according to Bloomberg.
Even though the three automakers make up 46 percent of the U.S. market, they will end up paying 74 percent of the noncompliance penalties, the group argued. The automakers would face $2,151 in compliance costs per vehicle, close to four times the $546 per vehicle for other automakers, according to Reuters.
According to a July 28 press release by the NHTSA, the proposed rules, if finalized, would “save Americans hundreds of dollars at the pump, all while making America more energy secure and less reliant on foreign oil.” The NHTSA calculated the combined benefits of the proposal to exceed costs by over $18 billion.
Consumers will save over $50 billion on fuel over the vehicles’ lifetimes, 88 billion gallons of gasoline consumption can be avoided, and more than 900 million tons of CO2 emissions can be prevented if the rules come into effect, the agency stated.
Volkswagen, which could face fines of more than $800 million through 2032 under the new CAFE standards, called the proposal “arbitrary, capricious, and an abuse of the agency’s discretion to set standards that are not feasible,” according to Reuters.
