Last December, Ford CEO Jim Farley was happy with at least part of President Donald Trump’s agenda for the auto industry.
Under Trump’s predecessor, Ford estimated it would face annual fines of $1 billion from 2027 to 2032 due to President Biden’s fuel economy standards. So when Trump announced that his administration was returning the Corporate Average Fuel Economy rules for automakers “to levels that can actually be met with conventional gasoline and diesel vehicles,” while calling the Biden administration’s standards “unrealistic,” there was reason for celebration.
The Trump administration fulfilled that promise 10 months later on Monday, Sept. 28, releasing the new, relaxed rules for fuel economy.
What are the new fuel standards?
On Monday, the Department of Transportation’s “Freedom Means Affordable Cars” initiative went public.
Under Biden, cars and trucks were required to have an average fuel economy of 49 miles per gallon by model year 2026 as part of the administration’s plan to reduce carbon emissions by between 50% and 52% below 2005 levels by 2030.
Carmakers no longer have to make their vehicles achieve fuel standards of 50.4 miles per gallon by 2031. Instead, finalized standards will reflect a combined industry fleetwide average, expected to be about 34.9 miles per gallon for passenger cars and light trucks combined.
For passenger cars alone, standards are now required to rise from 39.2 mpg in 2027 to 40.2 mpg by 2031. For light trucks, standards will actually fall from 30.3 mpg in 2027 to 26.4 mpg in 2031.
Of course, automakers that want to improve fuel standards above those thresholds can still do that, but they are no longer required to meet the 50.4 mpg. That change will save them billions of dollars, savings that the administration expects to trickle down to consumers.
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How much will U.S. car drivers save?
According to DOT Secretary Sean Duffy, car makers have added “hidden costs” to their vehicles to fund the technological improvements needed to meet the previous administration’s fuel standard ambitions.
But the new standards will save U.S. families $1,300 on the average cost of a new car, according to the administration.
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“The Biden-Buttigieg CAFE standards set fuel economy standards for gas cars so high that they created a back-door EV mandate,” according to the DOT. “The goal? Juice supply for a product American families were simply not interested in. Automakers and their workforces lost billions complying with these costly regulations.”
World’s top EV markets in 2024
- China: 6.4 million EVs sold
- Europe: 2.2 million EVs sold
- U.S.: 1.2 million EVs sold
- Rest of world: 1 million EVs sold
- Source: International Energy Agency
They estimate that resetting fuel economy standards will save U.S. taxpayers $138 billion over the next 5 years.
“This rule restores integrity to the national fuel economy program, balancing vehicle affordability and energy conservation goals while improving safety on our roadways,” said NHTSA Administrator Jonathan Morrison. “Newer cars are safer cars. By reducing vehicle prices, more American families will be able to afford newer vehicles, and sensible standards allow automakers more freedom to design and produce vehicles consumers actually want.”
Ford welcomes changes, won’t change EV strategy
Ford CEO Jim Farley called the changes the White House was proposing “common sense” last year.
“Today is a victory for common sense and affordability,” Farley said, standing while the president sat next to him. “This allows us to invest in affordable vehicles made in the U.S., which we will take the lead on, and will allow us to make vehicles more affordable.”
But while Ford is clearly happy with the latest developments, they are proving the second half of the DOT’s prediction wrong about what carmakers would do once standards are lowered.
Ford Model e losses by year
- 2025: $4.8 billion
- 2024: $5.1 billion
- 2023: $4.7 billion
- 2022: $2.2 billion
Even after Ford announced a $19.5 billion charge for its EV division, CEO Jim Farley never said he would abandon the tech. In fact, he doubled down, saying the company was more focused than ever on turning it around, and even shared that Ford had a plan to make its EVs profitable by 2029.
When Farley was asked why, after billions upon billions of losses, he was confident that Ford could turn around its fortunes and make Model e profitable by 2029, he said he got his inspiration from a Tesla rival, Chinese electric vehicle maker BYD.
“We think to make that business profitable, we have to get to a BYD cost,” Farley told Bloomberg. “And so this skunkworks project called the Universe Electric Vehicle that we’re making in Kentucky, that is designed to match the BYD cost in Mexico.”
“The really high-end EVs, the $50k, $60k, $70k EVs just weren’t selling,” CEO Jim Farley said in an interview Dec. 15.
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