American Carmakers Oppose Biden Administration’s Fuel-Efficiency Plans
American carmakers are standing against the Biden administration’s proposed fuel-efficiency plans for gasoline vehicles. This policy is a crucial part of the administration’s strategy to transition the United States into adopting electric vehicles.
The National Highway Traffic Safety Administration (NHTSA) issued a proposal in July called the Corporate Average Fuel Economy (CAFE) standards. These standards require all new gasoline vehicles sold in the country to have an average fuel economy of 58 miles per gallon (mpg) by 2032. Starting in 2027, car manufacturers will need to improve fuel efficiency by 2 percent annually for passenger cars and 4 percent per year for light trucks. However, the Alliance for Automotive Innovation believes the proposal is unreasonable and is seeking significant revisions to the policy.
The NHTSA rule would result in a $3,000 increase in average vehicle prices by 2032 due to penalties imposed on automakers for non-compliance. The group argues that this cost is excessive and will burden American consumers without providing any environmental or fuel savings benefits.
On Monday, the American Automotive Policy Council (AAPC), representing Ford, General Motors, and Stellantis, expressed concerns that the proposal would disproportionately impact the truck fleet.
The group urged the NHTSA to reduce the annual 4 percent fuel economy increase for light trucks to 2 percent. They highlighted that 83 percent of vehicles produced by these carmakers are trucks.
The proposed CAFE standard introduces a new method for calculating fuel economy, as suggested by the U.S. Department of Energy.
This method significantly lowers the fuel economy values for electric vehicles used in calculating automakers’ CAFE compliance. As a result, automakers are forced to either modify their gas-powered vehicles to meet the standards or shift towards selling electric vehicles.
The new CAFE standards are part of the Biden administration’s climate agenda, aiming to promote the use of electric vehicles by imposing strict regulations on fossil-fuel vehicles.
In April, the U.S. Environmental Protection Agency (EPA) announced new rules to reduce greenhouse gas emissions and other pollutants from motor vehicle emissions.
The EPA estimates that, if approved, these rules will lead to 67 percent of new passenger vehicles and light trucks being electric by 2032. Additionally, 50 percent of buses, 35 percent of short-haul freight tractors, and 25 percent of long-haul freight tractors are expected to transition to electric.
In response, Toyota and Stellantis have called the EPA’s expectations “overly optimistic.”
Toyota pointed out that meeting the EPA’s target of 67 percent would require setting up “hundreds of new mines” globally to obtain the necessary critical materials for manufacturing electric vehicles. The company also highlighted the insufficient charging infrastructure to support such a high level of electrification.
“The sources for those minerals are almost exclusively outside the U.S., as is most of the mineral processing to turn the ore into usable battery-grade material. And the charging infrastructure (both in-home and public) needed to support that level of electrification is far from where it needs to be,” the company said.
Burdening Gas Vehicle Manufacturers
The CAFE standards were already raised by the Biden administration over a year ago. During that update, the average fuel economy requirement was increased to 49 mpg by model year 2026. Gas mileage was set to rise by 8 percent annually for model years 2024 and 2025, and by 10 percent for model year 2026.
A few weeks ago, the AAPC sent a letter to the U.S. Department of Energy, expressing alarm over the estimated penalties for not meeting the new CAFE standards.
Tesla Model 3 vehicles for sale at a Tesla facility in Fremont, Calif., on May 23, 2023. (Carlos Barria/Reuters)
The AAPC calculated that Ford, GM, and Stellantis would collectively pay $10.5 billion in penalties over a five-year period under the CAFE rules. General Motors would face the largest penalty of $6.5 billion, followed by Stellantis at $3 billion, and Ford at $1 billion.
“These penalty figures are alarming given that the combined total of all civil penalties paid in the approximately 50-year history of the CAFE program is approximately $1.5 billion,” the letter stated, according to Bloomberg.
Despite accounting for 46 percent of the U.S. market, the three automakers would bear 74 percent of the noncompliance penalties, according to the group. Reuters reports that these automakers would face compliance costs of $2,151 per vehicle, nearly four times the $546 per vehicle for other automakers.
The NHTSA stated in a July 28 press release that if the proposed rules are finalized, they would “save Americans hundreds of dollars at the pump, all while making America more energy secure and less reliant on foreign oil.” The agency estimates that the combined benefits of the proposal would exceed costs by over $18 billion.
According to the NHTSA, consumers would save over $50 billion on fuel over the lifetimes of their vehicles, avoid consuming 88 billion gallons of gasoline, and prevent over 900 million tons of CO2 emissions if the rules are implemented.
Volkswagen, which could face fines of more than $800 million through 2032 under the new CAFE standards, criticized the proposal as ”arbitrary, capricious, and an abuse of the agency’s discretion to set standards that are not feasible,” according to Reuters.
How do supporters of the Biden administration’s fuel-efficiency plans argue that they would address climate change and greenhouse gas emissions?
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The Alliance for Automotive Innovation is an advocacy group that represents major automakers, including General Motors, Ford, and Stellantis. In a recent statement, the group expressed its concern over the proposed fuel-efficiency plans, stating that they would result in significant cost increases for consumers and hinder the affordability of vehicles.
Furthermore, the Alliance argues that the proposed regulations do not take into account the current market demand and consumer preferences. They believe that these regulations would limit the choices available to American car buyers and impede the competitiveness of American automakers in the global market.
On the other hand, supporters of the Biden administration’s fuel-efficiency plans argue that they are necessary to combat climate change and reduce greenhouse gas emissions. They believe that increasing fuel efficiency standards will encourage the adoption of electric vehicles, which produce zero tailpipe emissions. This, in turn, would help reduce the nation’s dependence on fossil fuels and promote a cleaner and more sustainable transportation sector.
Proponents of the policy also argue that the increased adoption of electric vehicles would stimulate innovation, create jobs in the manufacturing and renewable energy sectors, and lead to long-term cost savings for consumers in terms of lower fuel and maintenance costs.
However, critics of the proposed regulations argue that they could have unintended consequences. They argue that the increased fuel-efficiency requirements would lead to smaller and lighter vehicles, which may compromise vehicle safety. Additionally, they point out that electric vehicles are not yet widely accessible due to their higher upfront costs and limited charging infrastructure.
The debate between American carmakers and the Biden administration’s fuel-efficiency plans is likely to continue. Both sides have valid concerns and arguments, and finding a balance between environmental goals and consumer affordability is crucial. As the automotive industry transitions towards a more sustainable future, it is important to consider all perspectives and explore solutions that can achieve both environmental and economic objectives.
American carmakers are standing against the Biden administration’s proposed fuel-efficiency plans for gasoline
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