NHTSA More Than Doubles Fines for Not Meeting CAFE Standards

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In a move some automakers are calling sudden and “draconian,” the National Highway Traffic Safety Administration will more than double fines for failing to meet corporate average fuel economy (CAFE) ratings. Automotive News reports that the hefty increases will begin next month, even affecting 2015 model-year vehicles for which compliance reports have not been finalized.

The move was apparently spurred on by a law that went into effect last year, which instructed federal agencies like NHTSA to revise its civil penalties to better align with inflation and continue to act as a deterrent. Effectively, this meant raising the penalty rate from $5.50 to $14—NHTSA’s practice is to then match this rate up with each 0.1 mpg an automaker goes over the fuel economy limit, and then multiply that by the number of vehicles an automaker sells for that model year.

One auto executive working on fuel economy strategy told AN that “essentially no notice was given,” and that business is ordinarily conducted based on a known playing field, and “To have it change suddenly without notice and without the ability to respond is really troubling.”

The fines will undoubtedly affect, at the very least, how all automakers strategically approach fuel economy regulation and advancement. At the moment, automakers who don’t meet fuel economy targets can buy offsetting credits from one another, and the Alliance of Automobile Manufacturers is warning that those prices could rise.

When a company doesn’t buy credits to offset its shortfall on CAFE targets, it gets slapped with a fine. NHTSA has assessed an average of $20 million per year in penalties to five automakers between 2010 and 2014. Jaguar Land Rover has taken the biggest hit with $46.2 million in fines, followed by Daimler ($28.2 million), Volvo ($17.4 million), Porsche ($4.8 million), and Fiat ($3.6 million). Many of these companies have already put big plans in motion to improve fuel economy across their lineups, but a fine more than twice as large as expected could become the proverbial wrench for strategies years in development.

Transportation director at the Natural Resources Defense Council Roland Hwang told AN the penalty hike is “a badly needed reform.” Hwang alleged that automakers were actually saving money with the old $5.50 rate by just paying the fine rather than trying to actually hit the CAFE target.

NHTSA doesn’t seem to have much sympathy for the fine nor the blindsided manner with which it appears to have been announced. A spokesperson said that automakers have shown they have the ability to meet fuel economy and emissions standards.

Source: Automotive News (Subscription required)