On the Dash:
- CAFE standards now target a 34.9 mpg fleet average by 2031, down from roughly 50.
- Lighter crossovers move to the passenger car category in model year 2030, facing tougher targets.
- Credit trading ends in model year 2028, and lawsuits are expected, keeping inventory planning uncertain.
Last month, the National Highway Traffic Safety Administration (NHTSA) finalized new Corporate Average Fuel Economy standards (CAFE) for model years 2022 through 2031, aiming to lower the fuel economy targets set under the Biden administration. While Congress already eliminated civil penalties for CAFE noncompliance in 2025, the final rule builds on that change and further cuts stringency, according to a Sidley Austin analysis.
What the final rule changes
NHTSA projects the revised standards will produce a fleet average of 34.9 mpg by model year 2031, up from 31.8 mpg in 2022. Since the Biden-era rules set a trajectory of roughly 50 mpg for 2031, NHTSA’s December 2025 proposal projected about 34.5 mpg.
The agency reset the 2022 model-year baselines to 37.4 mpg for passenger cars and 29.4 mpg for light trucks. NHTSA expects most manufacturers to exceed the standards, with fleet averages reaching 40.2 mpg by 2031. The standards now exclude EVs’ fuel economy and plug-in hybrids’ electric operation. NHTSA says federal law requires that exclusion, and EVs still count toward a manufacturer’s compliance.
Additionally, the rule retroactively resets standards for model years 2022 through 2026, with NHTSA saying federal law lets it lower requirements for model years already on the road.
Two other changes affect product planning. Starting with model year 2030, new classification criteria will shift lighter crossovers from the light truck category to the passenger car category, subjecting them to tougher targets. Starting with model year 2028, the rule will end CAFE credit trading, which allowed automakers that exceeded the standards to sell credits to those that fell short.
“Thanks to President Trump’s leadership, we have finally ended the illegal mandate that forced automakers to produce more expensive electric vehicles that American families didn’t want,” Transportation Secretary Sean Duffy said in a news release.
What comes next
Legal challenges are expected. Pending cases already challenge the Biden administration’s inclusion of EVs in standard setting, and the reversal is likely to prompt new litigation. Challengers may also contest the retroactive resets for model years 2022 through 2026.
The rule applies only to passenger cars and light trucks. NHTSA says it plans to revisit regulations for medium- and heavy-duty trucks and engines. The rollback also mirrors the EPA’s effort to rescind vehicle greenhouse gas emissions requirements, which is also being litigated.
What it means for dealers
Lower targets could lead manufacturers to plan for more gasoline and conventional hybrid inventory, potentially changing allocation and product mix at the store level. While crossovers deserve a close look, lighter crossovers face tighter targets beginning in model year 2030, which could affect how manufacturers design and price a segment many stores depend on. Ultimately, the end of credit trading in model year 2028 changes how automakers balance fleet compliance. However, future administrations and Congress could shift policy again, keeping long-range inventory planning uncertain.
