Proposed US regulations aim to reduce EV mileage ratings in order to comply with fuel economy standards.

Asian Trade TVApril 11, 2023

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In an attempt to comply with government fuel economy requirements, the U.S. Energy Department (DOE) has suggested decreasing the mileage ratings of electric vehicles (EVs). This proposal has the potential to compel automakers to either enhance their conventional models or market more low-emissions vehicles

The DOE has proposed a significant revision to the way it calculates the petroleum-equivalent fuel economy rating for electric and plug-in electric hybrids in the NHTSA’s CAFE program. The current system has not been updated for over two decades.

The DOE stated that while encouraging the adoption of EVs can reduce petroleum consumption, giving too much credit for that adoption can result in increased net petroleum use by enabling lower fuel economy among conventional vehicles, which make up the majority of vehicles sold.

To determine Miles Per Gallon equivalent (MPGe) ratings for electric vehicles, various factors such as national electricity, petroleum generation, and distribution efficiency, as well as driving patterns, are taken into account.

However, environmental groups have pointed out that the current fuel economy ratings for EVs are significantly higher for CAFE compliance than what is listed on the government’s consumer website.

Major automakers, represented by the Alliance for Automotive Innovation, cautioned last year that reducing these values could discourage the adoption of EVs and have significant consequences.

The Alliance for Automotive Innovation expressed uncertainty on how the proposed DOE calculation would be integrated into future CAFE standards.

According to the proposal, a Volkswagen (ETR:VOWG_p) ID.4 EV with a current 380.6 MPGe rating under CAFE would now receive 107.4 MPGe under the new system, while a Ford F-150 EV’s rating drops from 237.1 to 67.1 MPGe, and a Chrysler Pacifica plug-in hybrid’s rating falls from 88.2 to 59.5 MPGe. Environmental advocacy groups, including the Natural Resources Defense Council and Sierra Club, had petitioned for the revision in 2021, citing that the previous fuel economy values for EVs were too high and allowed for CAFE compliance without a significant real-world increase in automakers’ overall fleets’ fuel efficiency.

The environmental groups’ petition that calls for a revision of the EV mileage ratings was supported by Tesla (NASDAQ:TSLA). Last week, sources told Reuters that the Environmental Protection Agency (EPA) is proposing new rules to encourage significant cuts in vehicle emissions, which would push automakers to increase their sales of electric vehicles.

The expected pollution cuts between 2027 and 2032 would result in at least half of the new US vehicle fleet being comprised of electric or plug-in hybrid models by 2030, aligning with President Joe Biden’s 2021 goal. NHTSA is also expected to propose new CAFE requirements in parallel. In 2022, NHTSA increased CAFE standards for vehicles, reversing the rollback implemented by former President Donald Trump.

If automakers cannot meet the requirements, they may buy credits or pay fines. Stellantis, previously known as Fiat Chrysler, paid a total of $152.3 million in CAFE fines for 2016 and 2017 and faces additional civil penalties. In 2022, NHTSA doubled CAFE penalties.