Proposed Fuel Economy Standards Could Impose Billions in Fines on General Motors and Stellantis

The proposed fuel economy standards put forth by President Joe Biden’s administration could result in significant financial penalties for General Motors (GM) and Stellantis, according to a letter from the American Automotive Policy Council. The letter, addressed to the U.S. Energy Department, highlights the potential fines of $6.5 billion for GM and $3 billion for Stellantis if they fail to meet the proposed Corporate Average Fuel Economy (CAFE) requirements.

The Detroit Three automakers, including GM, Stellantis, and Ford Motor, expressed concerns about the size of the expected penalties, deeming them “alarming.” The compliance costs for the Detroit Three automakers would be disproportionately higher compared to other automakers, with an estimated $2,151 per vehicle compared to the average of $546 per vehicle.

The proposed revisions to the “Petroleum Equivalency Factor” would significantly increase compliance costs for U.S. automakers, potentially hindering their transition to a fully electric future. The automaker group urged the Energy Department to reconsider its plan, emphasizing that the policy could reward manufacturers resisting the shift to electric vehicles.

The National Highway Traffic Safety Administration (NHTSA) proposed raising CAFE standards by 2032, aiming for a fleet-wide average of 58 miles per gallon. The Department of Energy (DOE) is seeking to revise how it calculates the petroleum-equivalent fuel economy rating for electric vehicles (EVs) in the CAFE program. In response, the DOE requested additional information from the Detroit Three automakers to better understand the challenges they face regarding product development lead time.

While encouraging the adoption of EVs can reduce petroleum consumption, the DOE cautioned against giving excessive credit for EV adoption, as it may lead to lower fuel economy among conventional vehicles. The agency has not provided immediate comments on the matter.

Automakers, including the Detroit Three, may face substantial CAFE fines, with estimates suggesting the industry as a whole could be subject to $14 billion in penalties. NHTSA has previously stated that automakers have the option to use electric vehicles to comply with standards and avoid penalties altogether.

It is worth noting that in prior years, both Stellantis and GM paid a combined total of $363 million in CAFE fines for failing to meet U.S. fuel economy requirements.

The proposed fuel economy standards and potential fines highlight the challenges faced by automakers as they strive to meet evolving environmental regulations. The industry continues to navigate the transition towards more sustainable transportation options, including the widespread adoption of electric vehicles.