Gas War: Tesla Asks U.S. to Increase Fuel Economy Fines

Last month, the U.S. National Highway Traffic Safety Administration (NHTSA) proposed new rules that would increase fines for automakers who previously failed to adhere to fuel efficiency requirements. EV manufacturer Tesla has predictably endorsed the rules and has begun urging the federal government to put the plan in action as soon as possible.

While automakers have issued concerns that increasing penalties could cost them over $1 billion per year through regulatory fines and the purchasing of carbon credits, Tesla has been asking the Biden administration and a U.S. appeals court to expedite the process and make the proposals binding. Though that’s undoubtedly because the company sells its credits to the tune of at least $350 million annually and doesn’t build a single automobile that’s powered by gasoline.

If you’re looking for a bad guy in this, there are plenty to choose from. Tesla is greedily trying to convince the government to hamstring its rivals while shoveling funds into its coffers; federal regulators now seem totally obsessed with destroying internal combustion engines and completely oblivious of the economic ramifications; this whole mess started because the previous administration delayed a 2016 rule that more than doubled penalties for automakers; and the current government doesn’t seem to be able to do anything but snap back to (or bolster) Obama-era policies.

Manufacturers have always had trouble adhering to Corporate Average Fuel Economy (CAFE) rules and I’ll be the first to question their efficacy. American consumers have long preferred larger vehicles with more robust powertrains, resulting in a slew of unpopular compliance vehicles and an average U.S. fuel economy (for all cars sold) that’s been hovering around 25 mpg for three presidential administrations. But this is all irrelevant to Tesla, who would happily let its rivals sweat as it avoids the matter by focusing on EVs.

According to Automotive News, Tesla executives met with the NHTSA on August 30th and issued a couple of letters:

The government memo said Tesla suggested NHTSA withdraw Trump’s action immediately, saying it “produces continuing uncertainty in investments and transactions across the industry, and any delays will continue to have deleterious effects on the credit market until the issue is resolved.” It added Tesla believes “any delays will continue to have deleterious effects on the credit market.”

Tesla on Aug. 27 separately again asked the Second Circuit U.S. Court of Appeals to quickly reinstate higher penalties. The court rejected Tesla’s request in April for immediate action pending NHTSA’s review.

“The uncertainty perpetuated by NHTSA’s sluggish rulemaking pace is thus compounded by the likelihood of yet another round of litigation,” Tesla wrote, warning uncertainty “may linger for several more years.”

Former President Donald Trump didn’t dissolve the rule, he simply pushed the original 2019 model year launch date for the larger penalties back to 2022 on the grounds that regulatory actions had run amok during the Obama administration. However, the Department of Transportation and NHTSA have been attempting to restore the original terms since Joe Biden took office. Though the potential for political intrigue is a lot lower than the above makes it seem. One side of the aisle wanted widespread industrial deregulation while the other wanted to increase regulatory measures.

Meanwhile, legacy automakers (including those transitioning toward electric vehicles) are broadly opposing updated CAFE rules that retroactively affect vehicles they sold before the 2022 model year. Manufacturers feel they adhered to the laws of the time and should not be subject to penalties incurred after a change in leadership and asked regulators to reconsider in August.

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