The National Highway Traffic Safety Administration (NHTSA) has reinstated a previously-enacted increase in penalties for automakers whose vehicles don’t meet fuel efficiency standards for model years 2019 and beyond.
Federal fuel efficiency requirements have proven to be an effective incentive for legacy automakers to begin selling EVs (they have also saved drivers millions of dollars in fuel costs). However, if the fines for failing to meet the requirements are low, automakers may choose to simply pay them (and pass the cost on to consumers) rather than make the necessary investments to improve fuel efficiency.
A regulation enacted in 2016 would have more than doubled existing penalties for automakers failing to meet Corporate Average Fuel Economy (CAFE) requirements, beginning with the 2019 model year, but the Trump administration pushed back the effective date to 2022.
NHTSA’s new rule, which takes effect 60 days after it is published, reinstates the higher penalties and increases them further for the 2022 model year.
NHTSA said the decision “increases the accountability of manufacturers for violating the nation’s fuel economy standards” and “incentivizes manufacturers to make fuel economy improvements.”
For the 2019 to 2021 model years, the fine is $14, up from $5.50, for every 0.1 mile per gallon each vehicle sold falls short of required fuel economy standards, multiplied by the number of noncomplying vehicles sold. For the 2022 model year, this rises to $15.
The agency didn’t collect penalties for the 2019 to 2021 model years while the issue was under review, so legacy automakers could now be on the hook for three years’ worth of unpaid fines. Naturally, there is weeping, wailing and gnashing of corporate teeth. NHTSA estimated that for the 2019 model year alone, the old-fashioned brands would collectively owe $294 million at the new rate, up from $115.4 million under the previous rules. Stellantis has estimated that the rule change will cost it as much as $572 million.
The decision is widely seen as a win for Tesla. Automakers that fail to meet the CAFE standards can buy credits from automakers that have excess credits.
Stellantis reportedly spent about 2 billion euros ($2.40 billion) to buy European and US emissions credits from Tesla over the 2019-2021 period. However, CEO Carlos Tavares told French publication Le Point in 2021 that his company could soon be meeting emissions targets (it’s not clear whether he was referring only to European targets). “With the electrical technology that PSA brought to Stellantis, we will autonomously meet carbon dioxide emission regulations as early as this year. Thus, we will…no longer have to pool with Tesla or anyone.”