Trump Administration Lowers Fuel Economy Standards, Potentially Boosting Gas-Powered Cars

The Trump administration on Monday announced new automotive fuel economy standards that relax regulatory requirements for automakers to limit emissions from gas-powered vehicles. The change effectively reverses the Biden administration’s stricter rules, which pushed for greater fuel efficiency and the creation of more electric vehicles.

The new rule lowers the Corporate Average Fuel Economy (CAFE) standard from 50.4 miles per gallon to 34.9 mpg by 2031. In 2024, the Biden administration increased fuel efficiency requirements by 8 percent annually for the 2024 and 2025 model years, 10 percent for 2026, and 2 percent annually from 2027 through 2031.

According to the U.S. Department of Transportation, the new rules will give automakers more flexibility to manufacture vehicles and will reduce the average cost of a new vehicle by $1,300.

“By reducing vehicle prices, more American families will be able to afford newer vehicles, and sensible standards allow automakers more freedom to design and produce vehicles consumers actually want,” said National Highway Traffic Safety Administration administrator Jonathan Morrison.

The Alliance for Automotive Innovation, a trade group representing several automakers, said in a statement, “NHTSA made the right call to better align fuel economy standards with the law and current market conditions.”

“The standards finalized under the previous administration effectively required a switchover to electric vehicles that was out of step with market realities and customer demand,” said John Bozzella, president and CEO of the Alliance for Automotive Innovation.

Democratic Senator Edward Markey slammed the Trump administration’s decision, saying, “Trump’s economic and foreign policy crises are already leaving families underwater from rising gas prices-and by attacking fuel economy standards, he’s also setting fire to the lifeboat.”

The new rule also resets how vehicles are classified. In the past, automakers could classify some SUVs as light trucks to meet less stringent fuel economy requirements. Beginning with the 2030 model year, the new rule changes the classification criteria to more accurately reflect each vehicle’s intended use.

The Department of Transportation estimates the change will flip the mix from 70 percent light trucks and 30 percent passenger cars to 30 percent light trucks and 70 percent passenger cars.

The new regulation also eliminates the CAFE credit-trading program beginning with the 2028 model year. The system allowed automakers to sell or trade credits earned when their lineups exceeded fuel economy targets to other manufacturers that didn’t meet the CAFE requirements.

The change could hurt EV makers such as Tesla, which has sold several of its credits to other automakers. The DOT said eliminating the credit-trading program “restores fairness, puts all automakers on an even playing field, and ensures manufacturers are spreading fuel-saving technologies throughout their fleets.”