This could cost them hundreds of millions of dollars.
As automakers continue to develop and launch new all-electric vehicles, such as the Ford F-150 Lightning, Porsche Taycan, and Volkswagen ID.4, they're still building and selling mostly internal combustion engine vehicles. Granted more and more are receiving electrification by way of hybrid and plug-in hybrid systems, but that's not enough for the US federal government. The National Highway Transportation Safety Administration (NHTSA) stated earlier this week it's considering hitting automakers with higher financial penalties due to their failure to meet fuel efficiency requirements over the past few years.
Back in 2016, the feds announced a new regulation that more than doubled fines in failing to meet Corporate Average Fuel Economy (CAFE) requirements. Automakers, expectedly, protested that after calculating it could cost their industry upwards of $1 billion every year.
Not only would major automakers be forced to pay out hundreds of millions of dollars, but the value of tax credits sold by Tesla, for example, would dramatically increase. Automakers like FCA, now Stellantis, buy those credits from the California EV automaker in order to comply with emissions standards. The original plan was for the new regulations to take effect starting with the 2019 model year, but that was under the Obama administration.
The Trump administration attempted to backtrack on that demand but a court later ruled to delay the implementation date to the 2022 model year. And now the NHTSA is trying again. The public now has 30 days to comment as to whether or not the 2016 rule should be reinstated.
Automakers, foreign and domestic, are concerned because this would retroactively result in high penalties. Ironically enough, it was Tesla who requested a US court to reinstate those penalties last March, claiming the Biden administration wasn't doing anything to stop the previous administration's policies that would make its tax credits less valuable.
The NHTSA continues to be very aggressive in clamping down on emissions in other ways. A few weeks ago, it proposed increasing CAFE requirements by 8 percent annually starting in 2024 through 2026. This would reverse a regulation that did the opposite by rolling back high requirements for the 2021 model year.