Tesla is fighting the auto industry over fuel economy standards

Tesla is fighting the rest of the auto industry in the US over respecting the Corporate Average Fuel Economy (CAFE) requirements set back in 2016.

Under CAFE, automakers have to achieve higher levels of fuel economy in the vehicles they sell in the US or otherwise face penalities, which they can avoid by buying credits from automakers who exceeded the requirements.

The penalties were set to double this year under an Obama-era rule, but the Trump administration froze them in an action taken days before leaving office.

NHTSA, the agency in charge of CAFE, has been considering reversing the Trump administration action, and it has been taking comments from both sides of the situation.

New documents are revealing who is on each side.

Reuters reports that Tesla met with NTHSA last month and pushed for them to reinstate the penalties:

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.

On the other hand, GM, Ford, Volkswagen, and Toyota, who all announced commitments to an all-electric future except for the latter, are fighting against it:

A group representing major automakers including General Motors, Toyota Motor, Ford Motor and Volkswagen, asked the court to reject Tesla’s request. “That Tesla might benefit from more certainty about the worth of the CAFE credits that it has amassed is hardly a reason to cut off an ongoing administrative process,” the group wrote in a court filing.

They are careful not to say that they are against higher fuel economy requirements, but they don’t want NTHSA to reverse the action since they might have to pay penalities for model years all the way back to 2019.

Some automakers said that it might cost them billions of dollars.

That money would either be paid in penalties to NTHSA, or automakers that exceeded the requirements, like Tesla, could sell them their credits for less.

As we previously reported, Tesla dominates the US EV market with over two-thirds of all-electric vehicles sold in the country coming from the electric automaker.

This results in Tesla having more credits than anyone, but they are a lot less valuable since Trump’s administration slashed the penalties.