One of the Trump administration’s most impactful moves, at least when it came to the US auto industry, was to roll back the aggressive US vehicle emissions restrictions implemented during the Obama years. In effect, it meant that rather than having to meet the 5% annual increases in fuel economy through 2026 called for under Barak Obama, carmakers would only need to manage 1.5% efficiency gains each year. It was a big win for the Detroit Three, which rely on market-driven demand and sales for their V8-engine-powered trucks and SUVs. Vehicles such as the Ford F-Series, Chevrolet Tahoe and Suburban, and Ram 1500 pickup trucks are all examples of such vehicles.
40 MPG By 2026
Unfortunately for the auto industry, the US is officially on track again to drastically cut new vehicle emissions, as the US Environmental Protection Agency (EPA) this week finalized new regulations that call for a fleetwide real-world average fuel economy of about 40 mpg by 2026. That’s 2 mpg higher than what the EPA had proposed back in August, and a full 8 mpg higher than what was called for under the Trump administration, making the Biden administration’s fuel economy requirements even tougher than those implemented under former President Obama, Reuters reports.
An important note: that 40 mpg average fuel economy refers to real-world efficiency – not the inflated, optimistic figures often cited in news stories that are based on obsolete testing standards. Automakers are required to meet a corporate average fuel economy of 55 mpg by that metric.
Still more could be on the horizon; according to officials, the EPA could pass still tougher emissions standards as early as next year requiring further gains in fleetwide average fuel economy that could carry through 2030 or beyond. President Biden has signaled that by 2030, he would like 50% of all new vehicles sold in the US to have a plug-in-hybrid – like the Jeep Wrangler 4xe – or battery-electric powertrain – like the GMC Hummer EV – although he has so far stopped short of signaling support for an outright phase-out of all internal combustion vehicles by 2035 like the one California has targeted. New York has outlined similar legislation.
What Does It Mean For General Motors, Ford Motor Company And Stellantis?
While Detroit-based automakers General Motors, Ford Motor Company and Stellantis continue to pay the bills with their fleets of pickup trucks and large SUVs, they are also better positioned than ever to meet the new EPA emissions restrictions, thanks to their respective rapidly growing commitments to electrification.
The battery-electric Ford Mustang Mach-E has been a smash hit, racking up tens of thousands of reservations within the first few months after its reveal, and a pure-electric version of Ford’s biggest-volume product, the F-150 Lightning pickup, is inbound. Meanwhile, GM already has an electric pickup of its own, the GMC Hummer EV, with two more on the horizon: the Chevrolet Silverado EV and GMC Sierra Denali EV.
Even Stellantis, formerly Fiat Chrysler Automobiles until that automaker merged with France’s PSA Groupe, is fighting to carve out a niche in the electric vehicle space. During the 2021 Stellantis EV Day, the conglomerate automaker committed to releasing a pure-electric version of the Ram 1500, and an electric Dodge muscle car, by 2024, and Jeep plans to offer a battery-electric version of each and every one of its nameplates by 2025. And all three of Detroit’s major automakers continue to improve the fuel economy of their internal combustion cars by expanding the number of mild- and full-hybrid offerings.
Even still, you can only lead a horse to water; you can’t make it drink. There’s yet the issue of slow EV adoption in the US – a large, spread-out country where the distribution of fast charging stations is woefully uneven. What’s more, General Motors has sold enough electric vehicles that its EVs have lost their eligibility for the $7,500 federal EV tax credit – a crucial tool that automakers have relied on in the US to offset the relatively high price tags of their battery-electric vehicles.
The $1.75-trillion Build Back Better Act infrastructure bill that includes provisions for new EV tax credits has been met with opposition by Democratic Senator Joe Manchin of West Virginia, and it’s safe to assume that Ford and Stellantis won’t lag far behind GM when it comes to losing their EV tax credit eligibility.
In short, that 40 mpg fuel economy figure might be a bit of a struggle for the Big Three US automakers in the near term.