EXCLUSIVE US Boost fines for automakers who fail to follow fuel economy rules in Tesla’s victory
Traffic is seen on a freeway in New York, the United States, July 2, 2021. REUTERS/Eduardo Munoz
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WASHINGTON, March 27 (Reuters) – The U.S. National Highway Traffic Safety Administration (NHTSA) on Sunday again introduced sharp increases in penalties for automakers whose vehicles fail to meet fuel efficiency requirements for the 2019 model years and beyond.
The decision was a win for Tesla (TSLA.O) that could cost other automakers hundreds of millions of dollars or more.
Confirming an earlier report by Reuters, NHTSA said the decision “increases the accountability of manufacturers for violating the country’s fuel economy standards” and the increase in the penalty “encourages manufacturers to make fuel economy improvements.”
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President Donald Trump’s administration, in its final days in January 2021, delayed a 2016 regulation that more than doubled penalties for automakers that fail to meet Corporate Average Fuel Economy (CAFE) requirements beginning with the 2019 model year.
NHTSA’s final rule, effective 60 days after its publication, reinstated the higher penalties and further increased them for the 2022 model year. The agency has not imposed any penalties for the 2019 through 2021 model years while the issue has been under investigation and is the subject of court challenges.
The final rule was signed Thursday by Steven Cliff, NHTSA’s chief official, ahead of its formal release.
For model years 2019 through 2021, the fine is $14, up from $5.50, for every 0.1 mile per gallon of new vehicles that fail to meet required fuel economy standards multiplied by the number of non-compliant vehicles sold. For the 2022 model year, this increases to $15.
Automakers protested the increase in fines in 2016, warning it could cost the industry at least $1 billion annually. The decision is expected to cost Chrysler’s parent company Stellantis (STLA.MI), for example, up to $572 million, according to the company’s previous estimates, while boosting the value of compliance credits sold by Tesla.
Automakers whose vehicles achieve higher fuel economy than required can sell credit to automakers that do not meet CAFE rules.
Under President Barack Obama, the higher penalties were scheduled to begin with the 2019 model year, but the Trump administration set the effective date for the 2022 model year following a court ruling.
The NHTSA estimated that the 2019 model year automakers would owe $294 million at the new rate, up from $115.4 million at the previous rate.
NHTSA added that automakers making plans for 2019-2021 “thought the penalties would not increase, did so at their own risk.”
The head of a trade group representing nearly every major automaker except Tesla said Sunday it would be a “better outcome” if the penalties were “invested in electric vehicles, batteries and charging infrastructure, rather than disappearing into the Treasury Department’s general fund.”
In August, NHTSA proposed increasing CAFE requirements by 8% annually for 2024 through 2026, reversing a Trump-era regulation that reversed higher requirements beginning in the 2021 model year. NHTSA is expected to issue its final CAFE rules through 2026 this week.
On Sunday, Stellantis said it “wants to work with the administration and Congress to allow authorities to use proceeds from penalties to support investments in the technologies and infrastructure needed to support a robust U.S. market for… to accelerate electric vehicles”.
Tesla did not immediately respond to a request for comment.
Congress in 2015 ordered federal agencies to adjust civil penalties for inflation. U.S. fuel economy fines have lost 75% of their original value after increasing only once since 1975 — from $5 to $5.50 in 1997.
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Reporting by David Shepardson; Editing by Cynthia Osterman
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