It was a high price to pay the U.S. government. The automaker didn’t meet the Corporate Average Fuel Economy (CAFE) requirements, which are mandated by the National Highway Traffic Safety Administration (NHTSA).
What are the CAFE standards?
CAFE requirements were designed to increase fuel economy and lower energy consumption. The NHTSA regulates and enforces the rules, with separate standards for light-duty and heavy-duty vehicles. Light-duty vehicles include passenger cars and light trucks, while heavy-duty vehicles include larger trucks.
The CAFE standards focus on making cars more energy efficient, while encouraging innovation and alternative fuel options. The ultimate goal is to lower greenhouse emissions and stop climate change. The 2012 guidelines set a target of having 2021 model cars with a 40.3 to 41.0 mpg rating. By 2025, cars are expected to have 47 mpg ratings. There are also incentives for natural gas, electric, hybrid, fuel cell and other vehicles.
The NHTSA also worked with the Environmental Protection Agency (EPA) to create the final rule for the fuel economy and environment labels seen on new vehicles. This affects the window stickers you see on cars at dealerships. The rule standardizes the stickers and makes it easier for consumers to figure out fuel economy.
Penalty for Fiat Chrysler
The $77M fine was for its 2016 model year. Its passenger cars didn’t meet the CAFE standards for that year. Fiat Chrysler was the only car manufacturer who paid a fine for 2016, and it also made history by paying the biggest fine in the previous five years.
Fiat Chrysler and other automakers have lobbied the current administration to lower CAFE standards and make them easier to achieve. They argue that setting the standard of 47 mpg by 2025 will be difficult for car manufacturers to accomplish. In addition, the guidelines were created in 2012 and didn’t anticipate some of the changes in the current market or consumer desire for larger vehicles.
One scenario that Fiat Chrysler and others want to see is freezing the CAFE targets at the 2020 levels, which are much lower and easier to follow. They also want to see a more gradual change toward stricter rules.
As Washington continues to debate the CAFE standards, new points in the arguments are appearing. For instance, lawmakers have stated that new rules could lead to the loss of 500,000 automotive jobs in the U.S. Some are proposing rolling back the CAFE rules to ease the burden on automakers. Others argue that the U.S. could fall behind other car manufacturers that will stick to better fuel economy guidelines. The proposed Safer Affordable Fuel-Efficient Vehicles Rule would freeze the guidelines at the 2020 levels. It would also try to make cars more affordable for consumers.
As the price of gasoline has decreased in recent years, consumers have responded by buying bigger vehicles that are less fuel-efficient. However, interest in better fuel economy has not disappeared completely. Consumer Reports found that drivers are willing to pay more for better fuel economy, especially if it helps the long-term value of the car. Critics point out that consumers appear to be saying one thing and doing something else, like buying less efficient cars.