Auto sector faces fines of US$14 billion over fuel economy standards

The Biden administration’s proposal to raise fuel economy standards through 2032 is unworkable and could cost automakers a total of more than $14 billion in fines, an industry group said Friday.

The Automotive Innovation Alliance, which represents General Motors, Toyota Motor and others, said the National Highway Traffic Safety Administration’s (NHTSA) Corporate Average Fuel Economy proposal “exceeds maximum viability” and projects that ““Manufacturers will pay more than US$14 billion in fines for non-compliance between 2027 and 2032.”

The fines would affect one in two light trucks and one in three passenger cars between 2027 and 2032, the group added.

According to another document consulted by Reuters, the Detroit Three – GM, Ford Motor and Stellantis, Chrysler’s parent company – would have to face about US$10 billion in CAFE fines in that period.

Around the world, efforts to reduce vehicle emissions and switch to electric vehicles are meeting resistance for cost reasons. European Union ministers agreed on Monday to water down a proposal on emissions from new vehicles.

An NHTSA spokesperson said the estimate cited by automakers represents the agency’s forecast and is “consistent with our legal obligations”.

He also noted that automakers “are free to use electric vehicles to comply with regulations and completely avoid sanctions”.

In June, Reuters reported that Stellantis and GM paid a total of $363 million in CAFE fines for failing to meet U.S. fuel economy requirements for previous model years.

“The number of non-conforming vehicles and manufacturers projected exceeds reason and, simply put, will increase costs for the American consumer with absolutely no environmental or fuel economy benefits“said the automotive group.

He added that “The expected average price increase of $3,000 over current vehicles will likely reduce sales and increase the average age of vehicles on our roads”.