The average new car, light truck or crossover must deliver at least 40 miles per gallon, federal regulators announced Friday, revealing a target that exceeds what was announced last August.
The finalized fuel economy numbers will require an 8% annual increase in 2024 and 2025, the Corporate Average Fuel Economy, or CAFE, standard rising by 10% in 2026. The Department of Transportation originally was expected to require 8% bumps in mileage through 2026.
“Starting in model-year 2024, when these standards take effect, Americans buying a new vehicle will spend less on gas than they would have if we hadn’t taken this step,” Transportation Secretary Pete Buttigieg said during a media presentation on Friday.
(The State of Washington bans sales of new ICE models by 2030. Click Here for that story.)
Freedom … and clean air
Higher mileage will provide “people the freedom to get to where they need to go more affordably,” Buttigieg added.
The Transportation Dept. chief noted the increases will reduce by 234 billion gallons the amount of fuel Americans are expected to burn through 2050, while also sharply reducing the production of emissions linked to smog and global warming.
The new standards replace the annual 1.5% increase that had been set under former President Donald Trump — a mandate that rolled back strict rules previously set during the Obama administration.
The announcement comes at a time when fuel prices, unadjusted for inflation, have reached record levels, the typical American motorist paying $4.24 a gallon for regular self-service gasoline on Friday, up nearly 60 cents from a month ago. In turn, studies are showing both growing support for stricter mileage rules and growing interest in battery-electric vehicles.
Switching on electrics
What is clear, is that more and more vehicles will have to be electrified in some form or another, according to analysts like Carlo Bailo, head of the Center for Automotive Research in Ann Arbor, Michigan.
More and more models are offering “electrified” drivetrain technology, starting with “mild” 48-volt hybrids like the new Mercedes-Benz S-Class. The familiar Toyota Prius begat dozens of conventional hybrids, and longer-range plug-in hybrids are also gaining market share.
Pure battery-electric vehicles are gaining ground fast after a slow start. Sales rose 83% in 2021 and J.D. Power and others have forecast demand could grow at that pace or faster in 2022, with General Motors CEO Mary Barra declaring that the industry is reaching a “tipping point” in favor of BEVs.
There were approximately 15 long-range models on sale in the U.S. at the end of the 2021 model year. TheDetroitBureau.com previously estimated the number will reach between 55 and 60 by December of this year and others have forecast more than 200 BEVs will be offered by the time the big CAFE increase goes into effect in 2026.
Automakers lend support but ask for a helping hand
Automakers have traditionally opposed CAFE increases of any form, especially strict jumps like the ones now set in place by the National Highway Traffic Safety Administration. But the manufacturers have been more upbeat of late, something that reflects the industry’s accelerated move to phase out internal combustion engines. GM, for example, wants to be 100% electric by 2035, according to CEO Barra.
But that doesn’t mean automakers aren’t raising concerns.
“Increased regulatory requirements for automakers will require supportive policies, as well as regulatory alignment with the EPA to ensure that standards can be attained,” John Bozzella, president of the trade group Alliance for Automotive Innovation, said in a statement.
The industry has been pressing for support in a variety of forms, starting with the creation of a nationwide network of 500,000 battery charging stations. That goal gets a boost from the infrastructure bill Congress approved last year.
Incentive increase stalled in Congress
Another favored measure, an increase in EV sales incentives, remains stalled in Congress, however, along with the rest of President Joe Biden’s Build Back Better plan.
Those could be the carrots automakers need to boost sales of electrified vehicles. Earlier this week, the Biden administration announced the stick, advising manufacturers that they will now pay substantially higher penalties for missing CAFE targets.
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.