The U.S. Department of Transportation has finalized significantly lower vehicle fuel economy standards for the 2022-2031 model years, reducing the regulatory pressure on automakers to improve fleet efficiency and potentially affecting the pace of electric vehicle adoption in the U.S. market.
The final rules set an estimated fleetwide average fuel economy requirement of 34.9 miles per gallon (mpg) for the 2031 model year, compared with approximately 50.4 mpg under standards finalized during the Biden administration. The National Highway Traffic Safety Administration (NHTSA) said the revised rules are intended to reduce vehicle costs and give automakers greater flexibility in responding to consumer demand.
New CAFE Rules Reduce Fuel Economy Requirements
The new rules, known as the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule III, reset Corporate Average Fuel Economy (CAFE) standards for passenger cars and light trucks.
NHTSA estimates that the revised requirements will produce an industry fleet average of about 34.9 mpg by 2031, compared with 30.1 mpg for the 2024 model year. The Transportation Department said the new standards are expected to reduce the average cost of a new vehicle by about $1,300 and save consumers an estimated $138 billion over five years.
The earlier Biden-era standards had called for the fleet average to reach approximately 50.4 mpg by the 2031 model year. Those standards increased fuel economy requirements by 2% annually for passenger cars from 2027 through 2031 and for light trucks from 2029 through 2031.
Credit Trading to End in 2028
The final rule also eliminates the inter-manufacturer CAFE credit trading system beginning with the 2028 model year.
NHTSA said the change is intended to reset the CAFE programme and eliminate what the agency describes as regulatory incentives that were not consistent with its interpretation of the governing law.
The policy change gives automakers greater flexibility in meeting fleet fuel economy requirements without relying on credits generated by other manufacturers.
Implications for Electric Vehicle Adoption
The lower fuel economy requirements reduce one regulatory incentive for automakers to increase the share of highly efficient vehicles, including battery-electric vehicles, in their fleets.
The change comes after the U.S. market experienced a slowdown in EV sales following the expiration of the federal tax credit for new EV purchases. Automakers including Ford, General Motors and Stellantis have subsequently adjusted parts of their EV strategies amid changing market conditions.
The revised CAFE requirements do not prohibit automakers from producing or selling electric vehicles. Instead, they change the fuel economy requirements that manufacturers must meet across their fleets.
Administration Defends the Policy Change
U.S. Transportation Secretary Sean P. Duffy said the revised standards are intended to reduce vehicle costs and give manufacturers more flexibility.
“Thanks to President Trump’s leadership, we have finally ended the illegal mandate that forced automakers to produce more expensive electric vehicles that American families didn’t want.”
The Transportation Department said the new standards would allow automakers to produce vehicles that better reflect consumer demand while reducing manufacturing costs.
Environmental Groups Raise Concerns
Environmental and clean-transport groups have criticized the reduction in fuel economy requirements, arguing that weaker efficiency standards could slow the development and adoption of more efficient vehicles.
Reuters reported that the revised rules are expected to increase fuel consumption compared with the previous standards and could also increase carbon dioxide emissions over time. The analysis also reported that automakers are expected to receive substantial reductions in compliance and technology costs under the new rules.
The policy therefore represents a significant change in the U.S. regulatory framework for vehicle efficiency, with automakers now facing less stringent fleetwide fuel economy requirements through 2031.
