Traffic moves along the 405 Freeway on February 13 in Los Angeles. Apu Gomes/Getty Images hide title toggle title Apu Gomes/Getty Images Subscribe to the Planet Money newsletter. The world is confusing. The economy can help The Trump administration announced Monday that it is scaling back how fuel-efficient U.S. automakers need to build their fleets. The Corporate Average Fuel Economy (CAFE) standards establish average fuel economy levels for automakers. The revised rules, which were finalized Monday, will now require automakers to make their new fleets of passenger cars and trucks up to 1% more fuel efficient each year, with the goal of reaching an average of 34.9 miles per gallon by the 2031 model year. This is below Biden-era rules, which called for a 2% annual increase in fuel efficiency with the goal of most vehicles achieve, on average, 50.4 miles per gallon by 2031. The fundamental reason: affordability. Administration officials argue that fuel efficiency technology is expensive and has helped drive up the cost of vehicles. They estimate that lowering the standards will reduce the sticker prices of new cars by about $1,300. “This administration is bringing relief to families and reviving the beating heart of American manufacturing,” U.S. Transportation Secretary Sean Duffy said in an online statement announcing the change. President Trump weighed in over the weekend on Truth Social: “These new standards will eliminate waste from building cars in America. That means LOWER PRICES, saving families thousands of dollars on a new, beautiful, safe car.” Climate advocates and auto industry watchers say the rule change is another step in the Trump administration’s efforts to roll back Biden-era climate policies, including cutting the federal tax credit for electric vehicle buyers, delaying federal funding for a national electric vehicle charging program and eliminating federal waivers that allowed California to set its own strict pollution regulations. In an emailed statement to NPR, Dan Becker, director of the Center for Biological Diversity’s Safe Climate Transportation Campaign, wrote that rolling back the standards would increase gasoline use and pollution, “costing consumers at the pump and at the doctor’s office.” “Trump is sinking sensible mileage standards at the worst possible time for consumers, who are being hit by sky-high prices at the pump,” he continued. According to AAA, the national average price of gasoline today is close to $4.50 per gallon, and that of diesel is around $6.50 per gallon, just below last week’s record. Relaxing CAFE standards will hamper the industry’s realignment toward electric and fuel-efficient vehicles, said economist Sue Helper, who studies the auto industry at Case Western Reserve University. “It’s very bad in the long term, because it slows down progress,” he said. “So we make our car companies less competitive. We give them less practice in making the cars that both Americans and the rest of the world will want in the future.” After all, American automakers hope to continue selling their cars in foreign markets that may have stricter emissions standards. And a future presidential administration could change the rules again. A legacy of the oil crisis of the 1970s CAFE standards have been part of the automotive industry for decades. In 1975, during the great oil supply crisis of that decade, Congress enacted rules encouraging automakers to make their fleets more fuel efficient in an effort to reduce Americans’ dependence on Middle Eastern oil. Since then, the national debate on fuel efficiency has changed; The United States is now the world’s largest oil producer and many regulatory changes have been driven by concerns about climate change. Since the early 2010s, fuel efficiency requirements for passenger cars and light trucks have increased steadily. In practice, Biden-era standards meant automakers had to make electric vehicles to balance their gas guzzlers; otherwise, they were subject to a fine. But the Trump administration eliminated that penalty last July as part of the One Big Beautiful Bill, effectively weakening Biden-era CAFE standards. In December, the White House proposed reducing them entirely. Shortly after, the National Highway Traffic Safety Administration (NHTSA) opened a public comment period. In its final rule announcing the change, NHTSA also said it will eliminate the ability of automakers to trade credits among themselves to make electric vehicles, a part of the Biden-era CAFE Standards that Republicans often criticized. This rule allowed automakers to purchase credits from electric vehicle manufacturers to offset making less fuel-efficient vehicles. This helped them meet their CAFE goals. Will relaxing CAFE standards make cars more affordable? In announcing the new change, the administration said lowering CAFE standards will make cars cheaper. “Rather than allowing manufacturers to design and produce vehicles they believe their customers will want and need, while delivering real fuel economy improvements across their fleets, the system has increasingly led manufacturers to try to fit square vehicle pegs into round rating holes to force the adoption of technologies that do not meet the demands of American families,” NHTSA stated in the final rule. “All of this adds inefficiency and costs, pushing even more consumers out of an already unaffordable new car market.” “It’s true that the price of new cars has gone up a lot,” says Case Western’s Helper. But she maintains that much of that is not due to fuel economy standards. Instead, he says, it’s because vehicles have gotten larger, faced tariffs and supply chain issues in recent years, and are often loaded with extras like infotainment systems. A 2023 Consumer Reports analysis found that between the 2003 and 2021 model years, vehicles gained about 30% more fuel efficiency, but attributed the price increase to an industry-wide shift toward expensive SUVs, rather than using more fuel-efficient technologies. And when it comes to the monthly costs of a new car, there are outside factors beyond the automaker’s control, such as the cost of an auto loan, which is affected by both the Federal Reserve’s benchmark lending rate and an individual buyer’s credit score. “One of the crucial points for vehicle affordability right now is the average monthly payment going up, because interest rates are so high,” says Ellen Hughes-Cromwick, who spent much of her career as Ford’s global chief economist and now studies clean energy as a senior visiting fellow at the center-left think tank Third Way. Additionally, a cut in the sticker price could eventually be offset by the expense of gasoline. If vehicles consume less fuel, that means drivers will have to fill up more frequently, which is especially noticeable in a year of high gas prices due to the war in Iran. Will automakers continue to make fuel-efficient vehicles? For now, American automakers are caught in something of a bind. On the one hand, Helper said, a rule change that makes it easier for them to sell trucks and SUVs is “good in the short term, because they make a lot of profits by making these giant vehicles,” although they are not as popular outside the U.S. This new measure “allows the U.S. to have more playing field in these little Galapagos protected from an ecosystem where no one else wants to compete,” Helper continued. But the Alliance for Automotive Innovation, a trade group that represents auto and light truck makers that sell vehicles to the United States and includes automakers such as Ford, General Motors and Stellantis, praised the move. “We are still reviewing the final rule, but NHTSA made the right decision to better align fuel economy standards with the law and current market conditions,” John Bozzella, the alliance’s president and CEO, said in a statement emailed to NPR. “Rules passed during the previous administration effectively required a shift to electric vehicles that was out of step with market realities and customer demand. Today’s final rule is an appropriate course correction,” he continued. Ford and Stellantis also sent statements to NPR. They welcomed the administration’s move and said it aligns regulations with market realities. “These standards will allow us to offer our customers the freedom to choose from a range of vehicles and powertrains that meet their needs, from brands they love and trust,” Stellantis said in its statement, noting that the company is investing more than $13 billion in U.S. manufacturing over the next four years. But in the long term, the change in CAFE rules risks hampering U.S. automakers in a global industry, Hughes-Cromwick said. “The future of the industry lies in the transition to electric vehicles,” he said. “The rest of the world is moving forward in this transition to electric vehicles. We have a very powerful competitor in terms of the Chinese electric vehicle industry.” “Lowering these standards now, when so many families are already struggling with rising transportation costs, will only make things more difficult for them. At the same time, lowering the bar on innovation risks a future in which the global auto market leaves the American industry behind,” Zero Emission Transportation Association CEO Albert Gore said in a statement. The association represents companies that manufacture electric vehicles and chargers. And automakers may have other reasons for not shifting gears too quickly on fuel efficiency: The administration’s latest move could face legal challenges, which could take a while to reach the courts. Or a future administration could re-implement more aggressive fuel economy standards. For companies that need to make decisions years in advance, deciding which models to build or which factories to design, the easiest path to follow might be the one they’re already taking.
