The fines automotive manufacturers pay for falling short on the Corporate Average Fuel Economy, or CAFE, standard will nearly triple going forward, with the added funds potentially being used to help support an expanded national network of EV charging stations, according to Reuters.
The move by the Biden administration reverses steps taken under former President Donald Trump. The current White House last year also reinstated plans to boost CAFE numbers. Those also had been rolled back by the Trump White House.
The higher fines will “increase the accountability of manufacturers for violating the nation’s fuel economy standards,” said the National Highway Traffic Safety Administration, and “incentivizes manufacturers to make fuel economy improvements.”
Fines could reach $1 billion annually
Currently, manufacturers pay $5.50 for every 0.1 mile per gallon per vehicle that their corporate fleet falls short of the CAFE rules. That now jumps to $14 for the 2022 model year and $15 going forward. For a manufacturer that sells a million vehicles annually and misses the target by just 1 mpg the fine would jump from a total $55 million this model year to $140 million, and again ruse to $150 million in 2023.
The penalties could hit Detroit automakers especially hard as they have cut back on their passenger car lines while rolling out a procession of more powerful light trucks like the Ram 1500 TRX. That model manages just 10 mpg in the city, 14 on the highway. Ram’s parent Stellantis has estimated the increase in CAFE penalties could result in $572 million in fines this year alone. And the industry, overall may face $1 billion in penalties.
The increases come as something of a gift for automakers focusing exclusively on battery-electric vehicles, such as Tesla, Rivian and Lucid. And they could benefit even more if the money were directed into the funds the Biden administration’s plan to use to build up the still-limited U.S. EV charging network. The president wants 500,000 charging stations in place by 2030, a project given a boost by last year’s federal infrastructure program.
Automakers propose alternatives
According to Reuters, a trade group representing most of the auto industry said a “better outcome” for the CAFE fines would be to invest them into “electric vehicles, batteries and charging infrastructure instead of disappearing into the general fund of the Treasury.”
In a statement, Stellantis said, it would “like to work with the administration and Congress to allow the agencies to use the proceeds from penalties to bolster investments in the technologies and infrastructure required to accelerate a robust U.S. market for EVs.”
Traditional automakers are relying on profits earned on vehicles with internal combustion engines to fund their increasingly aggressive electrification programs. General Motors will spend about $35 billion through mid-decade, while Volkswagen has laid out a target of more than $100 billion by 2030.
Biden v Trump
The Trump administration’s anti-regulatory stance saw it roll back a number of programs meant to clean up vehicle emissions and shift away from petroleum power. It sharply cut back a planned increase in CAFE fines and tried to take away a waiver allowing California to set standards tougher than federal guidelines. With nearly 20 states now adopting the California rules, that was expected to force automakers to switch more rapidly from internal combustion engines to electric motors.
The Biden White House this month restored the California waiver and recently took the first steps towards launching a charging station program. Last August, NHTSA and the EPA jointly announced plans effectively restoring Obama-era fuel economy rules. The final mandate is expected to be issued this week and would see CAFE rise 8% annually during the 2024 through 2026 model years.
