BY COMFORT OGBONNA

General Motors is expected to see its technology costs fall by about $20.4 billion through 2031 under new U.S. fuel economy rules that significantly reduce the requirements automakers must meet, according to the U.S. Transportation Department.

The changes are expected to reduce technology-related costs across the U.S. auto industry by an estimated $60.6 billion through 2031, or roughly $1,289 per vehicle, compared with the requirements established under the previous rules.

The revised standards represent a major shift in federal fuel economy policy and are expected to reduce the financial pressure on automakers to invest in costly fuel-saving technologies and electric vehicles solely to meet regulatory targets.

The new rule is expected to take effect in early December, following the completion of the federal regulatory process.

Under the previous standards finalized in 2024, General Motors had estimated technology costs of about $31.7 billion through 2031. The latest changes would substantially reduce those projected expenses.

The National Highway Traffic Safety Administration, which oversees federal fuel economy standards, said other major automakers would also see significant reductions in their projected costs.

Stellantis, the parent company of Chrysler, is expected to save about $6.6 billion in technology costs through 2031. Ford is projected to save $5.8 billion, Toyota $4.5 billion and Honda $4.1 billion.

The lower requirements mean automakers would have less need to install expensive equipment designed to improve fuel efficiency or accelerate the production and sale of electric vehicles to comply with federal standards.

General Motors said it supports the objectives of the revised rule and its effort to align fuel economy requirements more closely with conditions in the automobile market.

The changes come after years of debate over how aggressively the federal government should require automakers to improve vehicle fuel efficiency and reduce emissions.

Fuel economy regulations have traditionally encouraged manufacturers to develop more efficient gasoline-powered vehicles, hybrids and electric vehicles. Automakers that fail to meet required standards can face financial penalties or may need to purchase credits from companies that exceed the requirements.

Congress last year passed legislation eliminating penalties for failing to meet certain fuel economy requirements. The change followed substantial payments by automakers that had fallen short of federal standards.

Stellantis had paid about $775 million in civil penalties for failing to meet U.S. fuel economy requirements since 2019.

General Motors also has a history of significant fuel economy-related penalties. The company paid $128.2 million in penalties connected to vehicles produced in 2016 and 2017.

GM later paid another $145.8 million penalty and surrendered fuel economy credits valued at hundreds of millions of dollars following a government investigation that found excess emissions involving approximately 5.9 million vehicles.

The latest changes also reverse part of the more stringent approach pursued during the previous administration.

In 2023, the National Highway Traffic Safety Administration proposed increasing fuel economy requirements through 2032. At the time, the agency estimated the auto industry could face approximately $14 billion in penalties if manufacturers failed to comply.

Under that proposal, General Motors was projected to face about $6.5 billion in potential fines, while Stellantis faced an estimated $3 billion and Ford about $1 billion.

The fuel economy rules ultimately finalized in 2024 were less stringent than the earlier proposal. Those standards were estimated to expose the auto industry to no more than $1.83 billion in fines between 2027 and 2031.

The latest rule goes further by reducing the technology investments automakers are expected to make to satisfy federal fuel economy requirements.

The policy shift could have broader implications for the U.S. auto industry. Automakers will have greater flexibility in determining how quickly to transition their vehicle fleets toward electric and other lower-emission technologies, rather than relying primarily on regulatory requirements to drive those investments.

Consumers could also be affected, although the impact will depend on how manufacturers respond to the new standards. Lower compliance costs could reduce some expenses for automakers, while changes in vehicle technology, fuel efficiency and electric vehicle production could influence prices and the range of models offered in the U.S. market.

The rule is also likely to remain part of the broader debate over vehicle emissions, fuel consumption, electric vehicle adoption and the long-term direction of U.S. transportation policy.

For automakers, the immediate effect is a reduction in projected compliance costs and greater flexibility in meeting federal fuel economy requirements through the end of the decade.

Original article