NHTSA Increases Fines for Automakers Not Meeting Fuel Economy Rules, Tesla Excluded

While much of the U.S. is looking toward electric vehicles, the National Highway Traffic Safety Administration (NHTSA) says it isn’t happening quickly enough. The agency has signed a new rule that will fine automakers for each new car that falls short of the fuel economy standards. That means virtually all brands, save for Tesla, will be facing significant fines.

The National Highway Traffic Safety Administration is increasing fines

The NHTSA is increasing fines for automakers violating fuel economy standards, Tesla excluded
Tesla electric vehicles outside of a factory | Sean Gallup/Getty Images

According to Reuters, the NHTSA is not messing around any longer. The organization reinstated heavy fines and penalties for automakers in the U.S. that do not meet fuel efficiency requirements. This only applies to vehicles from 2019 and newer. This is a major win for Tesla electric vehicles and further sets it apart from carmakers trying to get into the electric vehicle business.

The NHTSA confirmed in its own statement that it was increasing civil penalties. “The interim final rule
applied the adjusted civil penalty rate applicable to automobile manufacturers that violate relevant corporate average fuel economy (CAFE) standards beginning with vehicle Model Year 2022.” Due to this, the NHTSA is withdrawing this ruling and returning to the December 2016 ruling. This would apply the CAFE penalty rate for vehicles starting with Model Year 2019.

The National Highway Traffic Safety Administration hopes that these fines will help make car manufacturers accountable for violating the fuel economy standards.

The NHTSA is increasing the fines on automakers to $14, up from $5.50

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The NHTSA has not been collecting fines from automakers for violating this rule in the last two years. Now, companies have 60 days from when the report was published to get in line or start paying fines. Since the issue was under review and not in place, the 2019 to 2021 model year cars have flown under the radar until now. And these are not cheap fines by any means.

For 2019 to 2021 model year vehicles, the fine itself is $14, up from $5.50, for every 0.1 miles per gallon that the car falls short of the fuel economy standards. This is then multiplied by the amount of non-compliant vehicles sold. If the vehicle is a 2022 model year, the price goes up to $15.

Back in 2016, automakers protested this penalty hike to no avail. The companies argued that it could sharply increase industry costs, which would be passed on to consumers. For example, it would cost Stellantis $572 million by previous estimates. On the other hand, it would increase the value of compliance credits for vehicles sold by Tesla.

These fines will cost major automakers, besides Tesla, a lot of money

The NHTSA estimates that automakers will owe around $294 million at the new price rate. That is up from $115.4 million previously. One group representing almost all of the major automakers in the U.S. (except Tesla) said these funds would be better off invested in electric vehicles instead of fines.

In 2015, Congress made federal agencies adjust civil penalties to account for inflation. Reuters says, “U.S. fuel economy fines lost 75% of their original value, having risen only once since 1975 – from $5 to $5.50 in 1997.”

For now, automakers have 60 days from when the bill was signed to comply. If these fines start impacting brands as people anticipate, this could drive new car prices up even more.

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