US eases fuel economy rules: What it means for gasoline cars and EVs

The US Department of Transportation announced the final rule on Monday, setting a fleetwide average fuel economy target of 34.9 miles per gallon (mpg) by model year 2031. That is significantly below the 50.4 mpg target set under the Biden administration.

The new standards are expected to reduce the upfront cost of new vehicles, according to the Transportation Department, but they will also lead to higher fuel consumption and carbon dioxide emissions compared with the previous rules, Reuters reported.

Transportation Secretary Sean Duffy described the change as an effort to give Americans more choice and lower vehicle costs.

“Thanks to President Trump’s leadership, we have finally ended the illegal mandate that forced automakers to produce more expensive electric vehicles that American families didn’t want,” Duffy said in the department’s statement.

The administration has repeatedly described the earlier fuel economy rules as a “backdoor EV mandate”. However, the CAFE standards did not directly require consumers to buy electric vehicles. Instead, they required automakers to meet fleetwide fuel economy targets, which could encourage manufacturers to sell more fuel-efficient vehicles, including hybrids and EVs.

What has changed?

The Corporate Average Fuel Economy (CAFE) programme requires automakers to meet fuel economy requirements across their fleets.

Under the new rule, the National Highway Traffic Safety Administration (NHTSA) expects average fleet fuel economy to reach 34.9 mpg in 2031. The average was 30.1 mpg for model year 2024, according to the Transportation Department.

The Biden-era standards had targeted 50.4 mpg by 2031. The new rule therefore represents a substantial reduction in the pace of fuel economy improvements required from automakers.

The rule also changes parts of the CAFE compliance system, including vehicle classification and the use of fuel economy credits.

From model year 2028, automakers will no longer be able to trade CAFE credits. Under the previous system, manufacturers that exceeded fuel economy requirements could earn credits and sell them to companies that needed help meeting their targets.

NHTSA has also changed how certain vehicles are classified as passenger cars or light trucks. The agency said the earlier system created incentives for manufacturers to make design changes that allowed some vehicles to qualify as light trucks, which faced different requirements.

The new classification system is intended to reduce that incentive. The rule does not prevent automakers from selling EVs, hybrids or other fuel-efficient vehicles. Instead, it reduces the regulatory pressure to increase their share of sales.

That could give manufacturers more room to continue producing gasoline-powered SUVs, pickups and other larger vehicles.

The Alliance for Automotive Innovation, which represents major automakers, welcomed the changes, saying the revised standards better reflect market conditions and consumer demand, Reuters reported.

What does it mean for car buyers?

The most immediate effect could be on the price and choice of new vehicles. The Transportation Department estimates that the new standards will reduce the average cost of a new vehicle by about $1,300 and save Americans $138 billion over five years. These are government estimates of the expected impact of the rule.

But a lower purchase price does not necessarily mean lower overall ownership costs.

Vehicles with lower fuel economy can require more gasoline over their lifetime. The actual impact on an individual buyer will depend on factors such as fuel prices, annual driving distance, vehicle size and the type of vehicle purchased.

The new rules could also make it easier for automakers to keep gasoline-powered models in their line-ups for longer.

That does not mean EVs will disappear from the US market. Automakers have already invested heavily in electric vehicles, batteries and related manufacturing capacity.

Instead, the new CAFE standards change the regulatory environment in which gasoline vehicles, hybrids and EVs compete.

What happens to fuel use and emissions?

The policy involves a clear trade-off. The administration says lower regulatory requirements will reduce vehicle costs and give consumers greater choice. Environmental groups argue that weaker fuel economy standards will result in higher fuel consumption and emissions.

Importantly, the Transportation Department’s own estimates indicate that the new standards will increase fuel consumption and carbon dioxide emissions over coming decades compared with the previous requirements, Reuters reported.

NHTSA also estimates that annual US oil consumption in 2050 will be about 1.3 billion barrels lower than in 2024 under the new standards. This is a comparison between projected 2050 consumption and 2024 consumption; it does not mean the new rule itself will reduce oil use by 1.3 billion barrels.

Environmental groups have criticised the policy. The Sierra Club said the weaker standards could shift some costs from automakers to consumers through higher fuel use and pollution-related impacts.

What happens next?

The final rule was signed by NHTSA Administrator Jonathan Morrison on September 25 and will take effect 60 days after publication in the Federal Register, according to the agency’s document.

The changes cover model years from 2022 through 2031, including revisions to earlier requirements and new standards for future model years.

For automakers, the immediate consequence is greater flexibility in deciding the mix of gasoline vehicles, hybrids and EVs they produce.

For consumers, the effect will become clearer through vehicle prices, model availability and fuel costs over the coming years.

The biggest change is the gap between the two fuel-economy targets: 34.9 mpg by 2031 under the new rule, compared with 50.4 mpg under the Biden-era standards.