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General Motors (GM) Braces for $6.5B US Fuel Economy Fine
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Reportedly, a proposal by Joe Biden’s administration can cost General Motors (GM - Free Report) and Stellantis (STLA - Free Report) $6.5 billion and $3 billion, respectively, in U.S. fuel economy fines. The administration proposed to raise fuel economy standards through 2032.
The American Automotive Policy Council, which represents GM, Stellantis and Ford Motor Company (F - Free Report) , wrote a letter to the U.S. Energy Department. In the letter, the council mentioned that the amount of penalty for not complying with Corporate Average Fuel Economy (CAFE) requirements is alarming.
Per the letter, Ford faces nearly $1 billion in penalties. Meanwhile, Volkswagen faces more than $1 billion in fines, the highest among foreign automakers.
A former letter asked the Department of Energy (DOE) to rethink its decision on revising the Petroleum Equivalency Factor, which could result in heavy compliance costs for U.S. automakers.
Per the current letter, Detroit Three faces a compliance cost of $2,151 per vehicle, while other automakers incur $546 per vehicle on average.
The U.S. government believes that increasing fuel efficiency standards and encouraging the adoption of electric vehicles can reduce the consumption of petroleum, which is better for the environment. However, they are also concerned that giving too much credit for electric vehicle (EV) adoption might lead to lower fuel economy for traditional gas-powered vehicles.
In July, the National Highway Traffic Safety Administration (NHTSA) proposed to raise CAFE standards by 2032 to a fleet-wide average of 58 miles per gallon.
DOE wants to revise the method for petroleum-equivalent fuel economy rating calculations for EVs in the CAFE program.
A group that represents all automakers said that the entire industry may face a total CAFE fine of $14 billion. NHTSA said that the automakers’ estimate is consistent with their statutory obligations and that the automakers can use electric vehicles to comply and dodge penalties.
If the automakers cannot comply with CAFE requirements, they buy credits or pay penalties. In June, GM and Stellantis paid a total of $363 million in fines for not fulfilling U.S. fuel economy requirements for model years 2016-2019.
Image: Bigstock
General Motors (GM) Braces for $6.5B US Fuel Economy Fine
Reportedly, a proposal by Joe Biden’s administration can cost General Motors (GM - Free Report) and Stellantis (STLA - Free Report) $6.5 billion and $3 billion, respectively, in U.S. fuel economy fines. The administration proposed to raise fuel economy standards through 2032.
The American Automotive Policy Council, which represents GM, Stellantis and Ford Motor Company (F - Free Report) , wrote a letter to the U.S. Energy Department. In the letter, the council mentioned that the amount of penalty for not complying with Corporate Average Fuel Economy (CAFE) requirements is alarming.
Per the letter, Ford faces nearly $1 billion in penalties. Meanwhile, Volkswagen faces more than $1 billion in fines, the highest among foreign automakers.
A former letter asked the Department of Energy (DOE) to rethink its decision on revising the Petroleum Equivalency Factor, which could result in heavy compliance costs for U.S. automakers.
Per the current letter, Detroit Three faces a compliance cost of $2,151 per vehicle, while other automakers incur $546 per vehicle on average.
The U.S. government believes that increasing fuel efficiency standards and encouraging the adoption of electric vehicles can reduce the consumption of petroleum, which is better for the environment. However, they are also concerned that giving too much credit for electric vehicle (EV) adoption might lead to lower fuel economy for traditional gas-powered vehicles.
In July, the National Highway Traffic Safety Administration (NHTSA) proposed to raise CAFE standards by 2032 to a fleet-wide average of 58 miles per gallon.
DOE wants to revise the method for petroleum-equivalent fuel economy rating calculations for EVs in the CAFE program.
A group that represents all automakers said that the entire industry may face a total CAFE fine of $14 billion. NHTSA said that the automakers’ estimate is consistent with their statutory obligations and that the automakers can use electric vehicles to comply and dodge penalties.
If the automakers cannot comply with CAFE requirements, they buy credits or pay penalties. In June, GM and Stellantis paid a total of $363 million in fines for not fulfilling U.S. fuel economy requirements for model years 2016-2019.
GM and Stellantis each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.