- The Trump administration’s final ruling lowers the 2031 regulatory fleet average from roughly 50.4 miles/gallon to 34.9 miles/gallon.
- Inter-manufacturer credit trading will end from model year 2028, removing an important source of revenue for EV-focused manufacturers.
- NHTSA claims the rule will cut vehicle prices, but its analysis indicates an additional 122bn gallons of petrol could be consumed by 2050.
The Trump administration has finalised a sweeping reduction in US vehicle fuel economy requirements, weakening one of the principal federal policies encouraging manufacturers to sell electric and highly efficient vehicles.
The National Highway Traffic Safety Administration’s new rule sets standards for passenger cars and light trucks through model year 2031. It projects a regulatory fleet average of approximately 34.9 miles/gallon in 2031, up from 30.1 miles/gallon in 2024 but sharply below the approximately 50.4 miles/gallon anticipated under the Biden-era standard.
The rule also retroactively amends standards covering model years 2022 to 2026, eliminates inter-manufacturer trading of fuel economy credits from model year 2028 and changes vehicle classifications from 2030. NHTSA expects the reclassification to reverse the present mix of about 70% light trucks and 30% passenger cars, partly by treating more passenger-orientated crossovers as cars.
Credit trading has allowed manufacturers exceeding their requirements, particularly EV producers, to sell surplus compliance credits to less efficient competitors. Ending it removes both a compliance tool for incumbent manufacturers and a revenue stream for companies with predominantly electric fleets.
Transportation secretary Sean Duffy said the administration had ended a mandate that “forced automakers to produce more expensive electric vehicles”. The Department for Transportation estimates the package will reduce the average new vehicle price by $1,300 and save consumers $138bn over five years. Those are modelled outcomes rather than guaranteed price reductions.
Lower prices, higher fuel exposure
The administration’s affordability case rests on manufacturers needing less fuel-saving technology and consumers replacing older vehicles more quickly. It also argues that newer vehicles improve road safety, estimating that faster fleet turnover could prevent 1,900 deaths and more than 300,000 serious injuries.
The opposing cost is paid at the pump. NHTSA’s final analysis says its selected policy could result in approximately 122bn additional gallons of petrol being consumed through 2050 compared with retaining the previous standards. The agency argues that this is less than one year of current US petrol consumption spread over almost 25 years. Nevertheless, it represents a sizeable transfer of cost from vehicle purchase to vehicle operation.
The timing makes that trade-off especially conspicuous. American motorists are already facing higher fuel prices because of the conflict with Iran and disruption to global oil markets. A policy intended to make cars cheaper therefore increases their long-term sensitivity to precisely the commodity shock affecting households today.
The rule does not prohibit EV production, and automakers will not instantly abandon programmes involving long development cycles and global product platforms. Consumer demand, state policies, Chinese competition and standards in export markets will continue to shape investment. But the federal floor is now low enough to give manufacturers substantially more freedom to prioritise combustion engine SUVs and pickups.
From an international perspective, slower US EV adoption could reduce orders for batteries, power electronics and charging equipment, weakening some global cost reductions. Conversely, capital and export capacity that would otherwise have served the US may be redirected towards Europe. That could increase competitive pressure on UK manufacturers while expanding the range of imported vehicles.
Legal challenges are also likely. NHTSA says the previous standards unlawfully considered EV availability when calculating what manufacturers could achieve, while opponents are expected to contest both that interpretation and the retroactive rewriting of earlier model years. The result may be renewed regulatory instability for an industry whose investment cycles extend well beyond a presidential term.
