Geoff Bennett:
The Trump administration is rolling back tougher federal fuel economy standards for new vehicles, giving automakers more flexibility over how their cars and trucks use fuel.
Amna Nawaz:
The move reverses policies aimed at increasing energy efficiency to encourage greater use of electric vehicles. According to the administration, the fleet-wide average will be 34.9 miles per gallon in 2031. Under Biden-era rules, the average would have been more than 50 miles per gallon.
And this new standard relaxes the requirements imposed on car manufacturers in terms of pollution control. The rise of gasoline-powered vehicles comes as the war in Iran continues to drive up oil prices.
For more on what these changes mean, I’m joined by David Shepardson, who covers transportation for Reuters.
Glad to see you again.
David Shepardson, Reuters:
THANKS.
Amna Nawaz:
So let’s start with the basics here. What exactly did the Trump administration change today?
David Shepardson:
So, as you said, it took the Biden rules, which would have increased efficiency quite dramatically in some years by 10%, from an average of 50 miles per gallon to 35 miles per gallon. And it did so until 2022.
This is a big advantage for automakers who, in the past, would have had to use credits or buy credits from a Tesla or a Rivian to meet these requirements. And it’s really part of the administration’s multi-pronged strategy to make it easier to buy gasoline-powered vehicles and to reduce the importance and, in some cases, make it more expensive to buy electric vehicles.
Amna Nawaz:
We heard today from Transportation Secretary Duffy. He said it would allow automakers to make vehicles Americans want to buy, not ones Washington forces them to build, in his words.
And the Trump administration says the move would reduce the cost of a new vehicle by $1,300. Is there any evidence to support this claim?
David Shepardson:
It is therefore true that, according to their estimates, automakers will reduce technology costs by approximately $1,289 per vehicle. Companies like GM will see their estimated costs drop by $20 billion by 2031.
However, there is no guarantee or requirement that automakers pass these savings on to the consumer in the form of a lower price. It’s also worth noting that, according to their estimates, fuel costs over the life of vehicles would increase by about $1,600 on average. So this would actually cost more over the life of the vehicles than the initial savings.
But it’s certainly true. Vehicles cost on average more than $50,000. There are many inflationary pressures on cars. The administration is looking for ways to reduce this initial cost.
Amna Nawaz:
You mentioned what this could mean for automakers. In your conversations, how do they react to the current rules?
David Shepardson:
Well, look, they didn’t like Biden’s rules. And now it was no longer a mandate for electric vehicles, as the Trump administration claims. However, it was part of a multi-pronged strategy to force automakers to build more electric vehicles and, ultimately, likely achieve a world equipped entirely with electric vehicles.
By having high standards, the easiest way to meet them would have been to build electric vehicles. Now, in this new world, you don’t have to build electric vehicles. For what ? Because there is no regulatory advantage. There are no credits. There’s no $7,500 tax credit for electric vehicles, so it’s more of a market-based strategy, and the government isn’t requiring these efficiency improvements that would bring benefits to people, even if they’re not necessarily willing to pay for it.
Amna Nawaz:
So, do we yet know what this means for the electric vehicle market and future production?
David Shepardson:
Well, I think the jury is still out. A lot depends on 2028 and the next elections. Certainly, by then, all the regulatory triggers to force automakers to build more electric vehicles and more efficient vehicles will be gone, with one exception, California.
Congress is still trying to revoke – Congressional Republicans, rather – California’s right to also regulate vehicles, require electric vehicles. So he’s sort of the last, really the last actor present here.
But without that, I think it will be, with all the regulatory rules aside, much easier to build less efficient vehicles that might have a cheaper initial price at the dealership.
Amna Nawaz:
And we’ve already seen some pushback from environmental groups, of course. They argue that less fuel-efficient cars mean more gasoline will be burned, which leads to dirtier air.
Simply put, what do we know? Has anyone looked into what these new rules would mean for the shows and the future?
David Shepardson:
Thus, by the Trump administration’s own admission, this would increase gasoline consumption through 2050 by almost 5%, or, according to one estimate among thousands of documents, by about 120 billion gallons of fuel by 2050 in addition. So that’s about $300 billion or $400 billion in costs that drivers will have to pay.
On the other hand, purchasing vehicles will cost less. There are some – they say there will be – which means cheaper vehicles. This means people are buying vehicles more quickly. This means safer vehicles. This represents an advantage for road safety.
When you’re talking about 15 million vehicles a year and Americans are spending $300 billion or $400 billion, we’re talking about huge numbers. It’s hard to quantify all the pros and cons when you add them up, but the upside is definitely that the vehicles are potentially cheaper, depending on the amount of savings. The downside is more emissions, as you pointed out, more gasoline burned and a move away from electric vehicles.
Amna Nawaz:
So in that balance, if you’re a consumer considering purchasing a new car or truck, what should you take away from today’s announcement? And when will consumers see the impacts of these rule changes?
David Shepardson:
It takes a long time for car manufacturers to change vehicles. Product cycles last three, four, five years. So, as far as the credits obtained by companies are concerned, these are air conditioning credits, other off-cycle credits, they no longer count.
So you can expect that automakers will probably retire some of these automotive vehicles. And I think you’ll see either some price reduction or perhaps lower price options for consumers. But the reality is that without tax credits, without government intervention – deciding or trying to incentivize business or build more fuel efficient vehicles, it’s really up to them.
You have to buy what you want. You need to value energy efficiency and try to take the long view. Is it worth paying more guys up front to get the hybrid or plug-in hybrid to get a more efficient drive, or would I rather have a cheaper vehicle up front and maybe not have to spend as much to buy the vehicle at the showroom?
Amna Nawaz:
David Shepardson covers transportation for Reuters. It’s always a pleasure to have you here. Thank you so much.
David Shepardson:
THANKS.
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