New CAFE Rule Not Likely to Ease Near-Term Affordability Challenges

---

Written by John Egan for IIR News Intelligence (Sugar Land, Texas)

---

Summary

Automakers are unlikely to get any clarity, and consumers will reap no short-term benefits, from the Trump administration's recent roll-back of a vehicle mileage-efficiency rule.

---

New Final Rule Cuts Vehicle Efficiency Standards 44%

In "substantially recalibrating" new car and light-duty truck mileage-efficiency standards September 28, the Trump administration said the step would make life more affordable for the American people. But that appears unlikely, at least in the short term, analysts said.

Under the banner of "Freedom Means Affordable Cars," President Donald Trump and Department of Transportation (DOT) Secretary Sean Duffy unveiled a final rule September 28 that sharply reduced the Corporate Average Fuel Economy (CAFE) standard for cars and light-duty trucks for model years 2022 through 2031. Under the final rule, a draft of which was released last December, automakers will be required to achieve a fleetwide average fuel economy of 34.9 miles per gallon (MPG) by model year 2031.

Lowering the vehicle efficiency standards was a backdoor way to eliminate the efforts of previous Democratic administrations to get carmakers to produce more electric cars and light-duty trucks.

In early 2022, the Biden administration enacted far tougher vehicle efficiency standard: about 49 MPG by model year 2026, and about 50.4 MPG by model year 2031. Critics of the Biden administration said its rule, coupled with tighter tailpipe emissions standards, in essence compelled carmakers to produce electric cars and trucks.

The Trump administration's final rule, if it survives challenges, would represent a 44% reduction in mandated fuel economy by 2031.

Although no lawsuits were immediately filed against the new rule, there were strong signs that the Sierra Club and the Natural Resources Defense Council (NRDC), frequent litigants against the Trump administration, were considering challenging the rule in court.

In a statement accompanying the release of the final 892-page rule, which is scheduled to be published in the Federal Register in the coming days, Duffy said, "Thanks to President Trump's leadership, we have finally ended the illegal mandate that forced automakers to produce more expensive electric vehicles that American families didn't want."

"With our commonsense standards in place, we are making the American dream affordable again, putting safer cars on the road and investing in the American autoworker," the secretary continued.

In advance of the final rule, President Trump said the new rule marked a "BIG DAY FOR AMERICAN AUTO WORKERS AND CAR BUYERS."

Will the New Rule Make Life More Affordable?

The administration claimed that the new rule would save the American people $138 billion over the next five years; prevent more than 300,000 serious injuries; and save 1,900 lives by encouraging new car sales.

"Newer cars are safer cars," Jonathan Morrison, administrator of the National Highway Traffic Safety Administration (NHTSA), a DOT agency, said in a statement.

The administration also estimated that the new measure would lower new-vehicle prices an average of approximately US$1,300. But with the price of a new vehicle averaging approximately US$50,000, that's a small, even negligible, cost reduction.

Plus, the new rule does not mandate automakers to rebate any savings to consumers.

Industry observers, including David Pickering, Industrial Info Resource's senior vice president of research for the Industrial Manufacturing Industry, cast doubt on whether the final rule would lower consumers' out-of-pocket costs for transportation or bring clarity to the manufacturers of cars and light-duty trucks.

"The rule will bring no clarity or joy to automakers or consumers," Pickering said in an interview. "Really, it's nothing more than a thought experiment. This new order feels more like political theater, given the closeness to the midterm elections."

The real affordability problem, Pickering and other said, was fuel prices, not the cost of a new vehicle. By lowering vehicle fuel efficiency standards, the Trump administration actually was worsening consumers' affordability challenges.

"We're halfway through his second presidency, and five weeks away from Democrats potentially capturing both houses of Congress," Pickering continued. "If that happens, they will use the Congressional Review Act to overturn the new CAFE."

By the Numbers

• 34.9: The fleetwide average fuel efficiency requirement in miles per gallon (MPG) automakers will be required to meet by model-year 2031 under a new rule.
• 50.4: The MPG standard for model-year 2031 vehicles set by the Biden administration in 2022.
• US$1,300: The average cost reduction for new vehicles the administration claimed the new rule would deliver.
• US$138: The amount, in billions, that the administration says new-car buyers will save over the next five years because of the new rule.

Affordability Measures Seek to Avert GOP Meltdown at Polls

The Trump administration's move came five weeks ahead of the midterm elections. Republican elected officials, including the president, have been seeking measures to show they have heard and are responding to persistent consumer complaints about the high cost of rent, gas, groceries, electricity and other consumer staples.

After blasting "affordability" as "a Democrat hoax" for nearly a year, Trump and his Cabinet have reversed course and floated a variety of measures they could use to show consumers they were working to bring down the cost of living.

But the search for quick solutions has proven to be elusive. Ideas such as halting U.S. exports of diesel fuel and suspending the federal gas tax have been proposed to bolster the electoral prospects of Republican elected officials who face the voters November 3.

Consumers have complained bitterly about the way transportation fuel prices have shot up since February 28, when the U.S. and Israel went to war against Iran.

On average, U.S. motorists and businesses were paying about US$6.40 for a gallon of diesel fuel at the end of September, up about 60% from the US$3.76 a gallon they paid before the war started, according to the American Automobile Association (AAA). Fuel buyers in some states, like California, Oregon, Hawaii and Alaska, are paying US$1 or more above the national average.

Gasoline prices at the end of September averaged about US$4.43 per gallon, up approximately 50% from their pre-war prices of approximately US$2.98 per gallon, AAA said.

Automakers Continue to be Whipsawed

Pickering said the new rule continued a years-long process where the party in the White House pulled automakers in different directions, at a cost in tens of billions of dollars, when it came to their vehicle decisions. For more on that, see January 20, 2026, article - Automakers Pull a Slow U-Turn on EVs.

Under Democratic presidents Barack Obama and Joe Biden, "automakers were pressured to produce a high percentage of electric cars and light-duty trucks," Pickering said. "They weren't outright told how many EVs they had to produce, but the way relevant rules were written, they could only meet the CAFE and tailpipe emission standards with a product slate that was heavily weighted towards EVs, which the American public didn't ask for and didn't buy."

It cost automakers tens of billions of dollars to retool their assembly lines to produce more EVs. As well, EV supply chains needed to be built. Most of those investments have been written off over previous quarters.

But the first and second Trump administrations reversed the course established by its Democratic predecessors and loosened CAFE and tailpipe standards, which pleased carmakers.

Pickering said that automakers continue to face high levels of uncertainty, some of which is tied to the upcoming election. No automaker would pivot to a new line of vehicles based solely on the September 28 rule, which could be overturned by the courts or a Democratic-led Congress. But years of back-and-forth rulemakings has cost the industry tens of billions of dollars.

Industrial Info Resources is tracking about 673 active U.S. automobile capital and maintenance projects, worth about US$39.8 billion, that are scheduled to begin work after January 1, 2027.

In addition, Pickering noted, the Trump administration's tariffs which have roiled the automobile industry, remain in litigation. Reversal of those tariffs, which were introduced after the U.S. Supreme Court ruled that the president's "Liberation Day" tariffs were unlawful, remains an ever-present possibility.

"Carmakers just want to go back to making cars," Pickering said. "A significant portion of the public appears to like electric + gasoline hybrids, much more than electric-only cars and light-duty trucks. Over the next few years, I expect automakers will have a blended slate of vehicles that includes hybrids as well as internal combustion vehicles."

Key Takeaways

• The Trump administration issued final rule on automaker Corporate Average Fuel Economy standards September, lowering model year 2031 efficiency requirements 44% from the Biden administration requirements.
• Consumers would save an average of $1,300 on new vehicles over the next five years, the administration said in a statement.
• Observers said it was unlikely that consumers, or automakers, would benefit in the near-term from the new rule, which may be challenged in court.
• Coming five weeks before Election Day as polls showed a growing percentage of the electorate turning against the president and a number of GOP candidates, the administration tried to position the new rule as responding to the affordability challenged facing consumers.

---

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).