Key Takeaways
- The U.S. Department of Energy pulled back from its initial fuel economy standards proposal for electric vehicles as sales of the battery-powered vehicles slump.
- The decision will make it easier for carmakers to keep building gas- and diesel-powered cars and trucks without exceeding corporate average fuel economy (CAFE) limits.
- The industry and the United Auto Workers union lobbied for easing the regulations because of concerns that companies would face billions in fines by not meeting the tougher standards.
With electric vehicle (EV) sales slumping and carmakers lowering production, the Biden administration is making it easier for manufacturers to produce gas- and diesel-powered vehicles and still meet corporate average fuel economy (CAFE) regulations.
The Department of Energy (DOE) announced final CAFE rules that delay and modify reductions of EV ratings for not complying with the rules. In its initial proposal, the DOE called for the petroleum-equivalent EV fuel economy (PEF) ratings to be lowered by 72% in 2027. The updated proposal cuts that to 65% and gradually phases it in through 2030 instead, a source told Reuters Monday.
The decision will allow carmakers to build more internal combustion engine vehicles and stay below the government CAFE ceiling.
The Alliance for Automotive Innovation, which represents the car companies, as well as the United Auto Workers union, lobbied for the eased standards, warning that the tougher requirements would cost the companies billions of dollars in fines.
Shares of Detroit’s Big Three automakers: General Motors Co. (GM), Ford Motor Co. (F), and Stellantis NV (STLA), all finished higher Tuesday.