EXCLUSIVE US raises fines for automakers who don’t follow fuel economy rules in Tesla win

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Traffic is seen on a freeway in New York, U.S., July 2, 2021. REUTERS/Eduardo Munoz

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WASHINGTON, March 27 (Reuters) – The U.S. National Highway Traffic Safety Administration (NHTSA) on Sunday reinstated steeply increased penalties for automakers whose vehicles fail to meet fuel efficiency requirements for 2019 model years and beyond.

The decision was a victory for Tesla (TSLA.O) that could cost other automakers hundreds of millions of dollars or more.

Confirming an earlier report from Reuters, NHTSA said the ruling “increases manufacturers’ liability for violating national fuel economy standards” and the increased penalty “incentivizes manufacturers to make fuel economy improvements”.

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President Donald Trump’s administration, in its final days in January 2021, delayed a 2016 rule that more than doubled penalties for automakers failing to meet Company Average Fuel Economy (CAFE) requirements. from model year 2019.

NHTSA’s final rule, which takes effect 60 days after publication, reinstated the higher penalties and increased them further for the 2022 model year. The agency did not collect penalties for the 2019 model years. to 2021 while the matter was under review and subject to legal challenges.

The final rule was signed by senior NHTSA official Steven Cliff on Thursday ahead of official release.

For model years 2019 through 2021, the fine is $14, down from $5.50, for every 0.1 mile per gallon of new vehicles below required fuel economy standards, multiplied by the number of vehicles nonconforming sold. For the 2022 model year, that drops to $15.

Automakers protested the penalty hike in 2016, warning it could increase industry costs by at least $1 billion a year. The decision is expected to cost Chrysler parent Stellantis (STLA.MI), for example, up to $572 million according to the company’s earlier estimates, while increasing the value of compliance credits sold by Tesla.

Automakers whose vehicles achieve better-than-required fuel economy can sell credits to automakers that don’t meet CAFE rules.

Under President Barack Obama, the higher penalties were to begin with the 2019 model year, but the Trump administration set the effective date for the 2022 model year following a court ruling.

NHTSA estimated that for the 2019 model year, automakers would owe $294 million under the new rate, up from $115.4 million under the previous rate.

NHTSA added that automakers that had made plans for 2019 through 2021 “thinking the penalties wouldn’t increase did so at their own risk.”

The head of a trade group representing nearly every major automaker except Tesla said on Sunday it would be “a better outcome” if the sanctions “were invested in electric vehicles, batteries and charging infrastructure in the world.” instead of disappearing into the general fund of the Treasury”.

In August, NHTSA proposed to increase CAFE requirements by 8% per year from 2024 to 2026, reversing a Trump-era regulation that reversed higher requirements starting with the 2021 model year. NHTSA is expected to release its final CAFE rules through 2026 this week.

On Sunday, Stellantis said it “would like to work with the administration and Congress to allow agencies to use sanctions proceeds to bolster investments in the technologies and infrastructure needed to accelerate a robust U.S. market for electric vehicles.” “.

Tesla did not immediately respond to a request for comment.

In 2015, Congress ordered federal agencies to adjust civil penalties to account for inflation. US fuel economy fines have lost 75% of their original value, having increased only once since 1975 – from $5 to $5.50 in 1997.

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Reporting by David Shepardson; Editing by Cynthia Osterman

Our standards: The Thomson Reuters Trust Principles.

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