Automakers score win with new Dept. of Energy rule
In a big win for automakers (GM, F, STLA), the Department of Energy has opted to ease in a new rule surrounding fuel economy standards.
Yahoo Finance's Pras Subramanian explains the new rules in the video above.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Stephanie Mikulich.
Video Transcript
- Well, a major win for automakers, but not necessarily climate enthusiasts. The White House is loosening emission rules. This means carmakers can build more gas-powered vehicles through 2030 and still meet regulation requirements. To break this down for us, we have Yahoo Finance reporter Pras Subramanian. So Pras, walk us through this announcement.
PRAS SUBRAMANIAN: Well, it's all fairly complicated and in the weeds, so I'm going to keep it a bit simple here. But basically, the Department of Energy is easing those guidelines, like you mentioned, it had for the EV transition, right?
How it works-- so automakers have a thing called CAFE requirements, or the average fuel economy requirements across their fleet. They were going to go up in 2027 and in 2030. At the same time, the amount that EVs contributed to the CAFE requirements were going to come down, so you wouldn't get that benefit of selling EVs as much as you do now. It means automakers would sell a lot more EVs in that time frame.
As we know, the EV take rate has been coming down. Consumers have other preferences these days. So the White House and DOE are backing down, listening to automakers, helping them out a little bit by easing in the phasing of these changes to the EV mileage ratings through 2030. So that the net effect here is that EVs will probably make up a little bit less than 50% of sales by 2030, as opposed to what the original requirements were, which were over 60%. So this is a big win for automakers.
- Pras, how much of this has to do with the pressure being placed by carmakers on the White House, who have said that this transition cannot accelerate at the pace that maybe the White House would have liked? How much of this is also about politics in an election year?
PRAS SUBRAMANIAN: Oh, yeah. I think that's a huge factor there. The automakers were definitely pressuring the White House and the DOE on these rules. There's an Alliance of Automotive Innovation, which is the big trade group for the automakers. They've been very vocal about how these changes were too extreme, too far-advanced. It would be too hard for them to do that.
And I think you're also seeing the Biden administration looking at what public opinion is on just EVs in general and saying, we should probably back off a little bit. We still want this to happen, but not at the rate that we originally required. And I think some environmentalists like the Sierra group are not happy about this.
So we'll see how it all shakes out, but as of right now, a good sort of a win for the automakers right now when it comes to that transition.
- Pras Subramanian is always staying on top of the auto story for us. Thanks so much.
