Trump Administration Lowers Fuel Economy Standards for New Vehicles

The Trump administration has finalized revised fuel economy standards for automobiles, significantly easing requirements for gasoline-powered cars and light trucks. The new rules project an industrywide average of 34.9 miles per gallon by 2031, a substantial reduction from the 50.4 miles per gallon target established under the previous administration. Transportation Secretary Sean Duffy stated the move aims to improve vehicle affordability and reduce costs for American families by eliminating mandates that he described as forcing automakers to produce expensive electric vehicles.

According to Electric Vehicles, nHTSA's final rule on September 28, 2026 sets annual CAFE increases at 0.9% for cars and 0.51% for trucks through 2029, phases out EV credit trading, and reclassifies compact crossovers as cars starting in MY 2030.

Impact on Industry Costs and Production

The U.S. Department of Transportation estimates that the revised standards will reduce technology-related costs across the auto industry by $60.6 billion through 2031, averaging approximately $1,289 per vehicle. General Motors alone is projected to save $20.4 billion in technology costs over the same period. President Trump, in a statement on Truth Social, argued that the relaxed requirements would remove waste from domestic vehicle manufacturing and encourage greater production within the United States.

According to European Commission, the U.S. 2031 target of 34.9 mpg (~158 g CO2/km) trails China's 2030 target of 3.2 L/100 km (~73.5 mpg) and the European Union's 2030 target (~42.6 g CO2/km) and 2035 zero-emission mandate.

Regulatory Changes and Market Response

Beyond lowering the mileage targets, the National Highway Traffic Safety Administration (NHTSA) has eliminated the ability for automakers to trade credits for electric vehicle production, a mechanism previously used to offset the sale of less fuel-efficient models. NHTSA Administrator Jonathan Morrison stated the rule seeks to balance vehicle affordability with energy conservation and safety. However, the policy shift has drawn criticism from environmental groups, including the Center for Biological Diversity and the Sierra Club, which argue the rollback will increase gasoline consumption and pollution.

According to National Highway Traffic Safety Administration, cAFE evolved from 18 mpg in 1978 and 27.5 mpg in 1985 through 2007 EISA reforms, 2012 Obama harmonized targets (54.5 mpg), the 2020 SAFE rollback (40.4 mpg), and the 2024 Biden rule (50.4 mpg).

Industry observers note that while the change may provide short-term relief for automakers by allowing for the continued production of profitable, larger vehicles, it could impact the long-term competitiveness of U.S. manufacturers in a global market increasingly focused on electrification. The Alliance for Automotive Innovation, representing major manufacturers including Ford, General Motors, and Stellantis, welcomed the rule as a necessary course correction to better align with current market conditions and consumer demand. The administration's move follows a period of rising fuel prices and comes as the industry navigates broader economic pressures, including high interest rates and supply chain challenges.