Automakers are lauding the Trump administration’s decision Friday to suspend a 2016 Obama administration regulation doubling penalties for automakers failing to meet fuel efficiency requirements — saving them as much as $1 billion annually.
In 2015, the Obama administration ordered the National Highway Traffic Safety Administration to increase the fines issued to non-compliant automakers from $5.50 for each tenth of a mile per gallon of fuel by which a vehicle exceed the new standard to $14.
The current administration, after reviewing the policy, elected to freeze the Obama administration’s rules indefinitely last year. In a statement late on Friday, NHTSA said it was faithfully following the intent of Congress to ensure the penalty rate was set at the level required by statute, Reuters reported.
The Alliance of Automobile Manufacturers, a trade group representing General Motors Co., Volkswagen AG, Toyota Motor Corp., Fiat Chrysler Automobiles NV and others, voiced its support for the decision on Friday, reminding everyone of the expected additional $1 billion cost associated with the previous standard.
Among that group, Fiat Chrysler publicly welcomed the decision. The company paid $77 million in fines in 2018. It “enables us to continue our significant investment plans in both our U.S. manufacturing footprint and new technologies required to maintain our trajectory of improved fuel-efficiency,” the carmaker said in a statement.
Automakers argued the fee increases would dramatically raise costs, since they would also boost the value of fuel economy credits that are used to meet requirements. In essence, automakers would pay significantly more to meet the standard or if they missed the standard. They couldn’t avoid the charges regardless.
They also suggest that the burden for these additional fees and penalties wouldn’t be born by the automakers, but would be passed along to the consumer in the form of higher prices for new vehicles trying to meet the new standard.
In September 2017, three environmental groups and several U.S. states including New York and California sued NHTSA for putting the Obama rules on hold. As part of that ongoing suit, the states said last year, “If the penalty is not sufficiently high, automakers lack a vital incentive to manufacture fuel-efficient vehicles.”
The legal battles are only just beginning. Last year, the Trump administration suggested it may attempt to strip the State of California of its ability to determine its own mileage and emissions standards. The California Air Resources Board said it would file suit to prevent that from happening.
Additionally, several automakers have changed their tunes about their opposition to the tougher fuel economy and emissions standards; however, that line of thinking hasn’t carried over to the increased fines.
Environmental groups have pushed the Trump administration to retain the increase. They contend that U.S. fuel economy fines have lost nearly 75% of their original value because the fines have only been increased once — from $5 to $5.50 in 1997 — in more than four decades.