Automakers Back 34.9-MPG Fuel Economy Rule in Appeals Court Fight

Six major automakers, General Motors, Ford, Toyota, Volkswagen, Hyundai and Stellantis, are siding with the Trump administration in a court case over federal fuel economy rules, CBT News reported. California, New York and other states and local governments brought the challenge, and its outcome could decide whether those governments can take their own approach instead of following the federal standards.

The administration has reset the Corporate Average Fuel Economy (CAFE) standards to a fleet-wide equivalent of about 34.9 mpg by 2031. The Biden administration had put the industry on a path toward a 50.4-mpg fleet average by the same year.

Automakers ask the First Circuit for stable rules

The Alliance for Automotive Innovation, the industry’s trade group, told the First Circuit Court of Appeals that manufacturers need “certainty and stability” in federal fuel economy standards. According to the group, shifting requirements affect capital spending, product development and validation work across hundreds of vehicle models.

Developing a new vehicle can take years. Automakers have to lock in engines, transmissions, factories and suppliers well before a model reaches dealer lots, so a rule change partway through can force them to rework plans that are already underway. CBT News noted that the six companies compete with one another but share frustration over rules that change with each administration.

How the standards have swung since 1975

CAFE, which sets average fuel economy targets across each automaker’s fleet, began in 1975. Presidents of both parties have rewritten it since then. The Obama administration set tougher fuel economy and greenhouse-gas requirements. During Trump’s first term, parts of those rules were revised. The Biden administration then raised the bar again, aiming for the 50.4-mpg target by 2031. The second Trump administration’s reset to roughly 34.9 mpg is the most recent turn.

Each reversal sends engineers and product planners back to adjust, which is the cost the Alliance is pointing to in its court filing.

What it means for car prices

The Transportation Department estimates the revised standards will cut manufacturers’ average compliance costs by about $1,289 per vehicle. The administration says the change gives automakers more flexibility and will help make vehicles more affordable.

Lower compliance costs for manufacturers do not automatically translate into a $1,289 drop in sticker prices. Automakers set prices based on what it costs to build a vehicle, along with competition, demand and their profit targets. A CBT News commentary said the administration’s affordability claim “deserves scrutiny” and that buyers should watch whether any savings show up on window stickers.

Credit trading ends for model year 2028

The new rule from the National Highway Traffic Safety Administration (NHTSA) also changes how compliance credits work. Under the earlier program, an automaker that beat its fuel economy requirement could earn credits, and some of those credits could be sold or transferred to other manufacturers that fell short.

The NHTSA rule ends trading between manufacturers for CAFE credits earned starting with model year 2028. That removes one way to meet the standards and changes the finances for companies that have relied on buying or selling credits. Tesla has earned substantial revenue from regulatory credits, though some of that comes from programs other than CAFE, which are separate systems.

A separate EPA action on greenhouse gases

The Environmental Protection Agency has made its own move. On Feb. 12, 2026, EPA Administrator Lee Zeldin announced the rescission of the 2009 greenhouse-gas Endangerment Finding and the federal vehicle greenhouse-gas standards that rested on it.

That action is distinct from NHTSA’s CAFE rule. NHTSA’s rule governs fuel economy, while the EPA action concerns greenhouse-gas regulation, so the two can be challenged and changed on separate tracks.

What this means for owners and shoppers

For people buying new cars, the immediate question is whether lower compliance costs for automakers will lead to lower prices or stay on the manufacturers’ side of the ledger. The court case adds another unknown. If the states win, they could pursue their own fuel economy approach, leaving automakers to plan around more than one set of rules.

For automakers, the end of CAFE credit trading for model year 2028 removes a tool some have used to balance their fleets. Companies that have counted on buying credits will need other ways to comply, and those that have sold them lose that income from CAFE.

Source: CBT News