CAFE Penalties Revisited

JULY 12, 2017

The National Highway Traffic Safety Administration (NHTSA) this week published a Federal Register Notice, seeking public comments on its 2016 civil penalty rate for violations of the Corporate Average Fuel Economy (CAFE) Standards.

The penalties were adjusted for inflation in 2016, but the NHTSA has determined it is appropriate to solicit additional input to determine if a revision to the adjustment is appropriate in response to a petition from the Auto Alliance Global Automakers.

The NHTSA added that it “sets and enforces CAFE standards for the United States, and in doing so, assesses civil penalties against vehicle manufacturers who fall short of their compliance obligations and are unable to make up the shortfall with credits. The amount of the civil penalty was originally set by statute in 1975, and for most of the duration of the CAFE program, has been $5.50 per each tenth of a mile per gallon that a manufacturer’s fleet average CAFE level falls short of its compliance obligation, multiplied by the number of vehicles in the fleet that has the shortfall.”

Automakers have paid nearly $900 million in penalties due to efficiency violations and the 2016 penalty adjustment augmented the rate from $5.50 to $14, which the auto groups contended would have a “negative economic impact.”

President Trump previously announced the government would re-examine the federal fuel efficiency standards for cars and trucks that currently require automakers to achieve a company-wide vehicle fuel economy average of 54.5 miles per gallon (mpg), or its equivalent, by 2025. The auto industry agreed to this 2025 mpg target with the Obama administration in 2012.

However, sutomakers have since been advocating for a change to the requirements because they believe they could not be met with current technology and the cost of the vehicles would be unacceptably high to consumers.

It remains to be seen if the Trump administration will officially “re-write” the vehicle efficiency standards, but a penalty reduction as a result of the Federal Register Notice could ease the affect on automakers and their suppliers.