Why Car Prices Are Going to Go Up HUGE

Car prices are going to go up even more. The Alliance for Automotive Innovation, a lobbying group in the U.S. that represents most major automakers, is once again criticizing the Biden Administration’s proposal to boost fuel economy standards. NHTSA is proposing to increase requirements at a rate of 2% per year for passenger cars and 4% per year for trucks and SUVs from 2027 to 2032. This would result in a Corporate Average Fuel Economy or CAFE target of 58 MPG for an automaker’s fleet. The Alliance says this will result in car prices increasing $3,000 on average by 2032 because of fines automakers will receive for not being able to comply. Last month, the Alliance claimed automakers will face more than $14 billion in fines for non-compliance if NHTSA doesn’t revise its proposal.

A group representing General Motors, Toyota Motors, Volkswagen Group and nearly all other major automakers on Monday sharply criticized the Biden administration proposal to drastically hike fuel efficiency requirements.

The Alliance for Automotive Innovation said the National Highway Traffic Safety Administration’s (NHTSA) Corporate Average Fuel Economy (CAFE) proposal was unreasonable and requested significant revisions.

The American Automotive Policy Council (a group representing the Detroit Three automakers) separately on Monday urged NHTSA to halve its proposed fuel economy increases to 2% annually for trucks, saying the proposal “would disproportionately impact the truck fleet.”

The group noted 83% of vehicles produced by Ford, GM, and Chrysler parent Stellantis are trucks. NHTSA said its rule “is focused on saving Americans money at the gas pump and strengthening American energy independence,” estimating combined benefits of its proposal exceed costs by more than 18 billion dollars.

The auto alliance said automakers would face more than 14 billion dollars in non-compliance penalties between 2027 and 2032.

U.S. automakers separately have warned the fines would cost GM 6.5 billion, Stellantis 3 billion and Ford 1 billion dollars.

Automakers also raised alarm at the Energy Department’s proposal to significantly revise how it calculates the petroleum-equivalent fuel economy rating for EVs in NHTSA’s CAFE program, saying it would “devalue the fuel economy of electric vehicles by 72%.”

GM said on Monday it could support NHTSA’s proposal if the Energy Department rescinded its petroleum-equivalent proposal.

Volkswagen, which could face over 800 million dollars in CAFE fines through 2032, said NHTSA’s proposal “is arbitrary, capricious, and an abuse of the agency’s discretion to set standards that are not feasible.”

Subaru said even if the NHTSA proposal was feasible “the current proposals do not allow for sufficient fleet ramp up to the necessary levels of electric vehicles.”

Automakers and the United Auto Workers union have previously also complained parallel rules proposed by the Environmental Protection Agency are not feasible and should be significantly softened.

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