In a move that surprises no one, the U.S. administration has announced a substantial rollback of Corporate Average Fuel Economy (CAFE) requirements for light-duty vehicles. Dubbed the Safer Affordable Fuel Efficient (SAFE) Vehicle Rule III under the "Freedom Means Affordable Cars" initiative, the new framework significantly relaxes emissions and efficiency mandates through the 2031 model year, delivering a major policy shift for the American automotive sector.
Under the finalized rule released by the U.S. Department of Transportation (DOT), the projected fleetwide efficiency target for 2031 drops from the 50.4 mpg (4.7 L/100 km) figure set under former President Joe Biden to 34.9 mpg (6.7 L/100 km). The revised mandate effectively resets fuel-economy requirements to levels established for the 2022 model-year. It thus eliminates the aggressive annual efficiency increases previously scheduled to take effect through the end of the decade.
Electrification under fire
Administration officials argue the relaxed targets bring regulations into alignment with current consumer demand. U.S. Transportation Secretary Sean Duffy stated that the revision ends mandates forcing automakers to produce costlier electric vehicles (EVs).
The DOT claims that lowering compliance hurdles will reduce average vehicle manufacturing costs by roughly $1,290 USD (about $1,830 CAD) per vehicle. The administration contends that lower vehicle purchase prices will encourage consumers to trade into newer, safer models, potentially preventing over 300,000 serious injuries and 1,900 fatalities.
However, government analysis also indicates that the rollbacks will shift costs directly to consumers over time. The DOT projects that vehicle owners will spend an additional $1,600 USD ($2,270 CAD) or more on fuel over a vehicle's useful life. Nationwide gasoline consumption is forecast to rise 4.6 per cent through 2050 compared to the superseded rules. That of course will come as fuel prices climb in the midst of a Middle East conflict that shows no sign of going away.
Beyond revised mileage numbers, the regulation overhaul alters two structural mechanisms:
End of credit Trading - Beginning in the 2028 model-year, the federal credit-trading program will end. Previously, automakers exceeding efficiency benchmarks sold credits to manufacturers falling short—a mechanism that generated significant revenue for pure-EV manufacturers like Tesla and Rivian.
Vehicle reclassification - Starting in model-year 2030, regulators will revise criteria that previously allowed manufacturers to classify light crossovers as light trucks to face lenient efficiency rules. The DOT expects this change to flip the current market mix from 70 percent light trucks to roughly 70 percent passenger cars, encouraging the production of smaller hatchbacks, wagons and affordable entry-level vehicles.
Industry reaction remains divided. The Alliance for Automotive Innovation, representing major manufacturers such as General Motors, Ford, Toyota, Volkswagen and Hyundai, commended the decision for establishing what it calls achievable benchmarks aligned with current market realities.
Conversely, environmental groups, including the Sierra Club, are preparing legal challenges, pointing out that the U.S. fleet average of 35.4 mpg achieved in 2024 already exceeds the newly established 2031 mandate.