The Trump administration will announce Wednesday that it plans to re-examine automaker fuel economy rules, potentially setting the stage for reduced fuel economy targets in the coming years. That could potentially be big news for automakers, who are currently required to achieve an average of 54.4 miles per gallon across their entire fleets by 2025.
It’s worth noting, however, that a simple review of fuel economy rules doesn’t necessarily mean that requirement will diminish. In fact, when automakers and regulators agreed to achieve 54.4 mpg by 2025, both sides agreed to re-evaluate the goal in 2017 or 2018 to determine if it was still feasible. Following President Trump’s election, the Environmental Protection Agency tried to finalize the regulation without the review, while automakers instead requested to stick with the original timeline.
“The President’s announcement rightfully returns the industry to the original plan to review the 2025 fuel economy standards,” said Michelle Krebs, industry analyst and director of automotive relations for Autotrader. “Much needs to be discussed and debated during that review by all sides, from the environmental impact to market realities.”
Those market realities Krebs mentions primarily refers to the fact that “corporate average” fuel economy standards rely on sales numbers — and with gas prices remaining relatively low, consumers simply aren’t purchasing efficient vehicles. In July, regulators said automakers are likely to fall short of the fuel economy targets, reaching just 46.3 mpg by 2025.
“Unsold inventories of these vehicles are stacking up,” said Krebs, referring to highly efficient models like hybrid, electric vehicles and plug-in hybrids. “The biggest discounts in the industry are on vehicles in this category. Resale values are poor.”
The review of fuel economy regulations, now likely set to take place later this year or in 2018 following the recent announcement from the Trump administration, will undoubtedly consider all these factors before determining whether regulations should remain where they are.