Trump Administration Will Lower Fuel Economy Standards

The Trump administration is preparing to sharply reduce federal fuel economy requirements, potentially giving automakers considerably more freedom to produce the trucks, SUVs and gasoline-powered vehicles that continue to account for most new-vehicle sales.

According to news reports, last week Transportation Secretary Sean Duffy said that the administration would soon announce its final Corporate Average Fuel Economy standards. Although the National Highway Traffic Safety Administration has not released the final rule, it is expected to resemble the proposal introduced in December.

That proposal would lower the projected industrywide fleet average for new passenger cars and light trucks to approximately 34.5 miles per gallon for the 2031 model year. The fuel economy rules adopted during the Biden administration were projected to produce an average of approximately 50.4 mpg by 2031.

Those figures should not be confused with the mileage estimates displayed on new-vehicle window stickers. CAFE is a complicated regulatory calculation covering an automaker’s entire fleet, with different formulas for passenger cars and light trucks. It does not mean every 2031 vehicle would have been required to deliver 50.4 mpg in everyday driving—or that future vehicles will now average exactly 34.5 mpg on the highway.

The practical difference is the amount of pressure placed on manufacturers to improve the efficiency of their overall vehicle lineups. The previous standards encouraged greater production of electric vehicles, hybrids and highly efficient gasoline models because automakers had to balance those vehicles against less efficient pickups and large SUVs.

Under the proposed replacement, required annual fuel economy improvements would generally slow to between 0.25% and 0.5% through 2031. The administration is also proposing to revise some standards retroactively to the 2022 model year, which could generate additional compliance credits that automakers could apply to later years.

The December proposal would eliminate the trading of CAFE credits among manufacturers beginning with the 2028 model year. Automakers that exceed federal requirements can currently sell credits to companies that fall short, a system that has produced substantial revenue for electric-vehicle manufacturers.

For car buyers, the biggest potential benefit is greater choice at a lower initial price. Automakers would face less regulatory pressure to add costly fuel-saving technology, subsidize slow-selling EVs or limit production of popular gasoline-powered models simply to improve their fleet averages. That could help preserve affordable conventional vehicles while allowing manufacturers to build more pickups, SUVs and other models based on actual customer demand.

NHTSA estimates that the proposed standards could reduce the average cost of a new vehicle by approximately $1,000. That does not mean every window sticker will suddenly drop by $1,000, but lower compliance costs could reduce some of the upward pressure on new-vehicle prices. Buyers who cannot conveniently charge an EV, regularly tow a trailer, drive long distances or simply prefer a gasoline vehicle could also have more options without being pushed toward a powertrain that does not fit their needs.

A wider selection of desirable vehicles could benefit shoppers in another way. When automakers can produce enough of the models customers actually want, buyers may encounter better availability and less need to compromise on body style, powertrain or equipment. More inventory and competition can also create better opportunities for discounts, although pricing will still depend on production, demand, interest rates and incentives.

There is another side to the savings calculation. NHTSA’s analysis estimated that the proposed standards could result in roughly 100 billion additional gallons of fuel being consumed through 2050, increasing motorists’ total fuel expenditures by approximately $185 billion. A buyer who saves money at the dealership could eventually give some or all of it back at the gas pump, especially if fuel prices rise or the vehicle is kept for many years.

Lower fuel economy requirements do not prevent automakers from producing efficient vehicles, hybrids or EVs. They simply reduce the federal requirement to do so. Manufacturers will still respond to fuel prices, consumer demand, international regulations and the billions of dollars already invested in electric and hybrid technology. Buyers who prioritize fuel economy should continue to have plenty of choices.

The final rule will determine exactly how much flexibility automakers receive. For buyers, the tradeoff is fairly straightforward: potentially lower purchase prices, more gasoline-powered choices and greater availability of popular trucks and SUVs, balanced against the likelihood of higher fuel consumption over time.

In short, buyers may save more at the dealership but spend more at the gas station. At least under the proposed rules, they would have more freedom to decide which side of that equation matters most to them.