The U.S. Department of Transportation orders the National Highway Traffic and Safety Administration to stop implementing new fuel economy regulations in an attempt to lower new car prices.
A new order by Secretary of Transportation Sean Duffy orders the NHTSA to scrap recently confirmed CAFE standards.
Former President Joe Biden and his administration embarked on a bold push for electrification with the Biden Administration laying out a roadmap for the adoption of green vehicles including an ambitious electric vehicle mandate. These policies forced many automakers to accelerate their plans for electrification with many of them initially pledging to offer an EV-only lineup of vehicles.
A few of these automakers have since backpedaled on these plans as changing market conditions eroded the appeal of EVs for consumers. With Donald Trump and his administration now firmly in place in Washington, the new administration has set its sights on the automotive sector with newly minted Secretary of Transportation Sean Duffy issuing an order that requires the NHTSA to reset CAFE standards for automakers.
CAFE reset part of an attempt to lower costs
The scrapped CAFE standard had a target of 50.4 combined MPG and it also had a mandate for electric vehicles.
The reset to CAFE comes after the NHTSA confirmed the new CAFE standards in 2024 which stemmed from the original guidance it issued in 2023. The newly axed standard would have required an industry-wide fleet average fuel economy of 50.4 miles per gallon for 2031 passenger cars and light trucks. The new rule also follows on a prior statement Trump issued during his first time as president in 2018 when he said that the then-existing 37 mpg mandate should be maintained through 2026.
“The memorandum signed today specifically reduces the burdensome and overly restrictive fuel standards that have needlessly driven up the cost of a car in order to push a radical Green New Deal agenda,” Duffy said in a statement. “The American people should not be forced to sacrifice choice and affordability when purchasing a new car.”
Duffy’s order was possible due to an executive order issued by President Trump called “Unleashing American Energy” which states states that energy regulations should be “grounded in clearly applicable law.” It also dictates eliminating the EV mandate proposed under former President Joe Biden, promoting choice, and canceling subsidies that “favor EVs.”
The DOT says that the new directive is an attempt to lower the price of new vehicles for Americans with the DOT using data from a Cox Automotive study that shows transaction prices for a new automobile have risen since March 2021 with the price going up from $40,880 to $47,218 in the first half of 2024. The DOT blames the bulk of the increase on regulatory costs but the effect these prices are having on consumers is plain to see with the higher sticker prices forcing more buyers into vehicle leases that have caused some of these buyers to end up “underwater” when it comes to payments.
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New target figure unknown as automakers enter uncharted territory
The missing ingredient in this change is a new target figure but as more automakers prepare to release a new wave of hybrid vehicles, look for that information to be revealed soon.
The key ingredient that’s missing from both the DOT’s release and the Trump executive order that proceeded it is a new target figure for the revised CAFE standards. The outgoing standard had 50.4 mpg as the target figure but expect that new goal to be lower but it remains to be seen how low the new figure will end up when everything is formally finalized.
In the meantime, look for automakers to pay close attention to the new CAFE regulations with some of them potentially adjusting their vehicle lineup and rollout plans to make up for the revised standard. Look for EVs to continue making their production debuts but as more automakers prepare to unleash a new wave of hybrid vehicles on the market, a target figure will eventually need to be announced so automakers will know what to expect moving forward.
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