WASHINGTON--The Biden administration on Tuesday handed Detroit automakers a major win by easing proposed rules that would have forced them to scale back production of gas-guzzling vehicles or face billions of dollars in fines.
The Department of Energy decision, first reported by Reuters on Monday, significantly slows the phase-out of existing rules that give automakers extra fuel-economy credit for electric vehicles they currently sell. The real-world impact of the complex regulations has been to help U.S. automakers meet federal standards for fleetwide fuel efficiency while they continue selling highly profitable gasoline-powered pickups and SUVs. The rule is part of a larger set of Biden administration regulations being released starting this week, after intense discussions with automakers who have said they could not meet initial proposals for a much more aggressive EV transition. Those proposals called for much stricter emission standards with the goal of pushing EV market share to 67% of all new cars sold by 2032 from less than 8% last year.
The Detroit Three produce even fewer EVs as a share of their overall sales; Stellantis, which owns the Jeep SUV and Ram pickup brands, currently sells almost no EVs in the United States. President Joe Biden’s retreat on the aggressive EV push comes as his 2024 re-election campaign faces a potential must-win scenario in the battleground state of Michigan, the hub of the U.S. auto industry and much of its unionized workforce. His Republican opponent, Donald Trump, has charged that Biden’s policies will kill auto jobs and aid China’s surging electric-vehicle industry. Environmentalists have long criticized the Energy Department rules for assigning unrealistically high fuel-economy values to electric vehicles, which are then figured in to fleetwide averages under federal Corporate Average Fuel Economy (CAFE) rules. The higher figures assigned to EVs help offset the values of gas-guzzling vehicles. The current rules, for instance, credit the Ford F-150 Lightning electric pickup as getting the equivalent of 237.7 miles per gallon (mpg).
The administration’s original proposal last year would have reduced that to 67.1 mpg, a more realistic estimate of its real-world efficiency compared with a gasoline-powered F-150. The original Biden administration proposal would have lowered such “petroleum-equivalent fuel economy” ratings for EVs by 72% in 2027. The final rule will instead gradually reduce the equivalency ratings through 2030 by a total of 65%, giving automakers more time to adjust. The industry cheered the Energy Department announcement. John Bozella, chief executive of the auto trade group Alliance for Automotive innovation, said the earlier proposal would "perversely disincentivize the production of battery electric vehicles" by scaling back EV fuel-economy credits that helped automakers meet federal regulations.
The new federal rules will govern all automakers selling U.S. vehicles but the biggest impact will be on the Detroit Three because of their heavy reliance on sales of large trucks and SUVs. Automakers and the United Auto Workers union have also raised alarms that the administration's prior proposal could have resulted in U.S. automakers facing $10.5 billion in CAFE fines through 2032 for not meeting fuel-economy requirements.
