GM will be the automaker hardest hit by the Biden administration’s proposed new fuel economy standards according to the American Automotive Policy Council, with The General said to be likely to rack up $6.5 billion in penalties by 2033.
The other Big Three automakers are also expected to pay ten-figure amounts but not as much as GM, with Stellantis estimated to pay $3 billion and Ford $1 billion in penalties during the same timeframe, Reuters reports.
“Alarming” penalties are attached to the new Corporate Average Fuel Economy or CAFE standards according to the American Automotive Policy Council, which represents the Big Three. The organization notes the potential new rule disproportionately punishes American automakers versus foreign companies selling their vehicles in North America.
The largest penalties likely to apply to a foreign automaker are the slightly more than $1 billion in fines to be paid by Volkswagen by 2033 if the new CAFE standards are adopted, with the rest of overseas vehicle manufacturers paying less. Due to certain details of the new rules, compliance expenses per vehicle are estimated to be $546 for foreign companies and $2,151 for GM, Ford, and Stellantis.
In particular, the new standards will sharply reduce the Petroleum Equivalency Factor for EVs, meaning each EV model will count for less in calculating a company’s overall average fleet fuel economy. The Sierra Club and other environmental organizations lobbied for the change in 2021 on the basis that “excessively high imputed fuel economy values for EVs means that a relatively small number of EVs will mathematically guarantee compliance.”
The new rules will not only heap the biggest penalties on American companies like GM, but will “reward those auto manufacturers resisting the transition to a fully electric future the most,” the American Automotive Policy Council argued.
The Council earlier described the new fuel economy standards “unrealistic.” It claimed the added cost per vehicle would simply drive Americans to use older vehicles or continue driving currently owned vehicles longer, defeating the purpose of the regulations by encouraging utilization of older, less fuel-efficient cars.
The NHTSA proposal includes a requirement for an annual increase in fuel efficiency of 2 percent for passenger vehicles and 4 percent for trucks starting in 2027. As a result, required fuel efficiency would climb to 58 miles per gallon by 2032. Simultaneously, the lowered MPGe rating of EVs under the new formula would make it harder for GM and other automakers to achieve this average fuel efficiency, even by producing more electric vehicle models.
The NHTSA has not yet responded to the latest commentary on the proposed CAFE standards by the Big Three, though it previously dismissed concerns by saying making more EVs is a viable solution for avoiding penalties.