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WASHINGTON (Reuters) -The proposal by President Joe Biden’s administration to hike fuel economy standards through 2032 would cost General Motors (NYSE:GM) $6.5 billion in fines and Chrysler parent Stellantis (NYSE:STLA) $3 billion, according to a letter from an industry group seen by Reuters.
The American Automotive Policy Council, representing GM, Stellantis and Ford Motor (NYSE:F), said in a letter to the U.S. Energy Department on Friday that the size of the expected penalties for not meeting proposed Corporate Average Fuel Economy (CAFE) requirements are “alarming.” Ford separately faces about $1 billion in penalties, the letter said. GM and Stellantis declined to comment beyond the letter.
The previously unreported letter asked the Energy Department (DOE) to reconsider its plan to revise the “Petroleum Equivalency Factor” that will result in “disproportionately higher compliance costs” for U.S. automakers.
Detroit Three automakers face $2,151 per vehicles in compliance costs compared $546 per vehicle on average sold by other automakers, the letter said, and the policy “would reward those auto manufacturers resisting the transition to a fully electric future the most.”
The National Highway Traffic Safety Administration (NHTSA) in July proposed hiking CAFE standards by 2032 to a fleet-wide average of 58 miles per gallon by boosting requirements 2% per year for passenger cars and 4% annually for pickup trucks and SUVs.
DOE wants to significantly revise how it calculates the petroleum-equivalent fuel economy rating for EVs in NHTSA’s CAFE program.
DOE sent Sept. 14 letters to the Detroit Three automakers “requesting additional information to help the DOE fully understand the ‘specific challenges regarding product development lead time,'” the automaker group said.
“Encouraging adoption of EVs (electric vehicles) can reduce petroleum consumption but giving too much credit for that adoption can lead to increased net petroleum use because it enables lower fuel economy among conventional vehicles,” DOE said in April. The agency did not immediately comment Monday.
A group representing nearly all major automakers said last week the industry as a whole could face $14 billion in CAFE fines.
NHTSA did not immediately comment Monday but previously said the estimate cited by automakers is “consistent with our statutory obligations” adding automakers “are free to use electric vehicles to comply and avoid penalties altogether”.
Automakers buy credits or pay fines if they cannot meet CAFE requirements. In June, Reuters first reported Stellantis and GM paid a total of $363 million in CAFE fines for failing to meet U.S. fuel economy requirements for prior model years.
