Photographer: Patrick T. Fallon/Bloomberg

Carmaker Fines for Fuel Economy Shortfalls Under Review by U.S.

  • Penalties set to more than double starting in 2019 model year
  • BMW, Jaguar, other luxury brands have paid highest penalties

The Trump administration is considering easing steeper fines proposed by Obama-era regulators for automakers that don’t meet tougher fuel economy standards, a move that would give a break largely to luxury brands like Jaguar, BMW and Porsche that have paid the highest penalties in the past.

The National Highway Traffic Safety Administration said in a regulatory filing Friday it will seek public comment on how to revise plans slated to go into effect from the 2019 model year which would more than double the civil penalties on auto manufacturers that fall short of meeting government-set economy targets.

“Seeking comment on the inflationary adjustment will allow stakeholders to provide input and provide NHTSA additional information to inform the agency’s decision regarding how the CAFE civil penalty should be adjusted for inflation,” NHTSA said in a statement.

Since the mid-1970s, automakers have been fined $55 for each mile-per-gallon shortfall, multiplied by the number of vehicles sold in that model year. Congress in 2015 instructed all federal agencies to update their civil penalty formulas to reflect inflation, and NHTSA proposed to increase the fine to $140 per mpg shortfall, per vehicle sold.

Higher Fines

Companies have paid more than $890 million in penalties, according to NHTSA, since the agency’s fuel economy program went into effect in 1975. Separately, carmakers projected that cars and light trucks from the 2016 model year would be the first to fall short of industry-average fuel economy goals since 2004, and that the shortfall would widen the following year.

Facing an expensive double-whammy -- higher per-vehicle fines coupled with rising fuel-economy standards -- they asked NHTSA to reconsider.

The Alliance of Automobile Manufacturers, a trade group representing 12 automakers including General Motors Co., Ford Motor Co. and Volkswagen AG, praised the agency’s reconsideration as “good news for the auto industry and consumers.” The group, along with the Association of Global Automakers, which represents Honda Motor Co., Nissan Motor Co. and 10 other companies, petitioned for such a move last fall citing “serious concerns about the effects of the significant adjustment.”

Hardest hit by the rising fines would likely be luxury brands including Jaguar-Land Rover, BMW and Porsche, which may be exposed to millions of dollars in additional penalties. Tata Motors Ltd.’s Jaguar-Land Rover brand paid more than $14 million in penalties stemming from its 2013 model year light trucks, for example.

Help From Trump

NHTSA’s review comes amid President Donald Trump’s drive to slash regulations viewed as costly or burdensome to businesses. The Trump administration has also taken aim at rules seeking to make cars and light trucks more fuel efficient by getting extra time to dispute the Environmental Protection Agency’s standards to curb greenhouse gas emissions. That overturned a decision made under former President Barack Obama that Trump said at the time “would have destroyed, or further destroyed, the auto industry.”

The EPA rules are aligned with NHTSA’s CAFE regulations to require annual gains in vehicle fuel efficiency to a projected fleet average of 38.3 miles per gallon in 2021, continuing to rise through 2025. New cars and trucks in the U.S. averaged 32.2 mpg in model year 2015, the most recent data available under NHTSA’s program.

“In light of the fact that CAFE standards are set to rise at a significant rate over the next several years,” the agency said in Friday’s filing, “it is likely that many manufacturers will face the possibility of paying larger CAFE penalties over the next several years than at present.”

NHTSA also delayed the rule indefinitely pending the reconsideration, according to a second filing Friday.

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