The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule III for Model Years 2022 to 2031 Passenger Cars and Light Trucks

The following discussion contains NHTSA's explanation of how the agency has considered the analysis in this preamble and the accompanying Final TSD and FRIA and other relevant information in determining that the final standards are maximum feasible for MYs 2022- 2026 and MYs 2027-2031 passenger cars and light trucks. As discussed in detail throughout the section below, NHTSA believes the small, steady, incremental increases in fuel economy standards over time, which preserve the ability for manufacturers to focus on safety, affordability, and consumer choice, are reasonable and appropriate, and best reflect and balance the various practical considerations and limitations mandated by Congress for the CAFE program. 1. Why is NHTSA's conclusion different from the 2020, 2022, and 2024 final rules?

NHTSA described in the proposal how the fuel economy standards the agency promulgated in recent years failed to satisfy EPCA's requirements in 49 U.S.C. 32902(h) because the prior standards considered the fuel economy of dedicated vehicles and dual-fueled vehicles in charge-depleting mode. Consequently, NHTSA concluded that the prior standards did not advance and, indeed, had come to undermine the goals established in EPCA for the CAFE program. In accordance with its authority to reconsider and modify past policy decisions,\988\ and in the exercise of the Secretary's express authority to “prescribe regulations amending” CAFE standards,\989\ NHTSA outlined in the proposal several reasons for resetting the CAFE program.

\988\ See, e.g., Phoenix Hydro Corp. v. FERC, 775 F.2d 1187, 1191 (D.C. Cir. 1985); Alabama Educ. Ass'n v. Chao, 455 F.3d 386, 392 (D.C. Cir. 2006) (quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 57 (1983)); Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016); FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009).

\989\ 49 U.S.C. 32902(c).

First, NHTSA summarized the agency's final rule published on June 11, 2025,\990\ as well as the position the agency previously took in its 2020, 2022, and 2024 final rules that it could account for the factors prohibited from consideration in subsection 32902(h) by using a narrow construction of that provision. This narrow interpretation permitted the Model to add dedicated alternative and dual-fueled vehicles to the fleet of vehicles in response to reasons other than NHTSA's CAFE standards,\991\ and outside of the years for which NHTSA was setting standards. Specifically, in the 2022 and 2024 final rule baselines, NHTSA

accounted for zero emission vehicle (ZEV) mandates applicable in California and the other States that have adopted them,\992\ and some vehicle manufacturers' voluntary commitments to the State of California to continued annual nationwide reductions of vehicle greenhouse gas emissions through MY 2026, with greater rates of electrification than would have been expected under NHTSA's 2020 final rule. In addition, in the baselines for all three final rules, NHTSA accounted for manufacturer responses to previously promulgated fuel economy and greenhouse gas emissions standards, which included dedicated vehicles (like EVs) and dual-fueled vehicles (like PHEVs) operating in charge depleting mode. NHTSA prohibited the consideration of dedicated vehicles or dual-fueled vehicles operating in charge depleting mode only as a compliance option in response to the agency's fuel economy standards during “standard-setting” years (i.e., the model years being evaluated as the subject of the active rulemaking) and similarly prohibited consideration of manufacturer use of compliance credits only during the standard-setting years. In other words, the model did not apply dedicated or dual-fueled technology to a manufacturer's fleet of vehicles when simulating a cost-effective pathway for the manufacturer to comply with a given level of CAFE standards in standard-setting years only, but application of the technology was otherwise permitted.

\990\ 90 FR 24518 (June 11, 2025).

\991\ In accordance with E.O. 12866 and Circular A-4, to evaluate properly the benefits and costs of regulations and their alternatives, agencies must identify a “no-action” baseline: what the world will be like if the final rule is not adopted.

\992\ 42 U.S.C. 7507. Other States have adopted California's ZEV program requirements under sec. 177 of the Clean Air Act (so-called “Section 177 states”).

As NHTSA concluded in the June 2025 final rule, its prior consideration of the factors prohibited in subsection 32902(h) is inconsistent with a plain reading of subsection 32902(h). Consideration of those factors only in response to reasons other than NHTSA's standards and in non-standard-setting years did not somehow avoid the statutory inconsistency; EPCA prohibits NHTSA from considering those factors in any way in establishing the maximum feasible CAFE standards.

Next, NHTSA explained in the proposal that the large increases in the stringency of standards applicable to the succeeding model years through MY 2026 were not feasible or practicable, within the meaning of EPCA, for new gas-powered cars and trucks that manufacturers were likely to produce in those years. The inclusion of EVs inherently impacted the agency's determination of maximum feasible standards because EVs generally are imputed to have significantly higher fuel economy than ICE vehicles.\993\ NHTSA would not have proposed or adopted those stringent standards if the agency had not considered the fuel economy of EVs in its modeling analysis. NHTSA reasoned in the 2024 final rule that this consideration of EVs was appropriate because “accounting for technology improvements that manufacturers would make even in the absence of CAFE standards allows NHTSA to gain a more accurate understanding of the effects of the final rule.” \994\ However, the inclusion of dedicated vehicles in NHTSA's previous analysis impacted materially the standards that ultimately were promulgated.

\993\ Fuel economy for EVs is determined using the PEF set by the Department of Energy. For example, one EV manufacturer had a fuel economy performance of 739.9 and 751.9 miles per gallon for its MY 2020 domestic passenger and light truck fleets as compared to the 43.4 and 30.2 miles per gallon overall performance of the same fleets for all manufacturers.

\994\ 89 FR 52540, 52611 (June 24, 2024).

The agency presented data showing the stringency of the existing CAFE standards for MYs 2022-2026 passenger cars and light trucks as estimated in the 2020 and 2022 final rules and compared those standards to the provisional (i.e., not based on EPA final compliance data) fuel economy performance levels of gas-powered vehicles manufactured for sale in MYs 2022-2024.\995\

\995\ Provisional performance values are based on non-final fuel economy performance (i.e., submitted to NHTSA as part of manufacturers' pre- and mid-model year reports, but not EPA final compliance data) and are subject to change based on final verified fuel economy values and sales volumes. [GRAPHIC] [TIFF OMITTED] TR30SE26.198

The gasoline- and diesel-powered vehicle fleet--the only fleet that NHTSA can consider in setting standards--was unable to comply with the previously estimated standards in all model years and all regulatory classes for which the agency had provisional gasoline- and diesel- powered vehicle fuel economy performance data. The agency observed that the non-compliance increased in each successive model year because the baseline fleet was inclusive of EVs that inflate overall fleet fuel economy performance. The agency noted that, though some may argue that such an analysis is not relevant when conducted across the entire U.S. fleet, because fuel economy standards apply to individual manufacturer fleets, the conclusion that the 2022 standards exceeded maximum feasibility is confirmed on a manufacturer-by-manufacturer fleet level analysis as well. On an individual manufacturer basis, only a single

manufacturer's passenger car fleet could meet the MY 2022 standard with their gasoline- or diesel-fueled vehicles produced for that model year (Hyundai's domestic passenger car fleet), and only a single manufacturer's gasoline- or diesel-fueled light truck fleet could meet their standard (Subaru). NHTSA concluded that this information confirmed that the existing standards were set in a way that considered factors beyond the capability of gasoline- and diesel-powered vehicle fleets at the time the standards were promulgated.

NHTSA also recognized in the proposal that its tentative conclusion that MYs 2022-2023 standards are legally impermissible differs from NHTSA's and EPA's joint 2020 final rule.\996\ However, that final rule also suffered from some of the same deficiencies as the 2022 and 2024 final rules by including consideration of the subsection 32902(h) factors, though to a lesser extent than the 2022 and 2024 final rules because of the inclusion of CARB's ZEV standards in the baseline used for those later rules. Furthermore, the annual 1.5-percent rate of increase applied in the 2020 final rule, which reflected consideration of input provided by several major automakers and other interested parties, had not proven to reflect the real-world year-over-year fuel economy improvements feasible for gasoline- and diesel-powered vehicles.

\996\ 85 FR 24174 (Apr. 30, 2020).

NHTSA also presented data showing that the same faults apply to the existing standards for MYs 2027 and beyond. For passenger cars, based on NHTSA's updated estimates of manufacturer compliance with the No- Action Alternative, approximately 77 percent of the MY 2027 fleet would not be able to comply with the standard, and only three individual manufacturers' fleets would comply.\997\ NHTSA reasoned that this was likely based on the significant (8 percent, 8 percent, and 10 percent) stringency increases in MYs 2024-2026, which, as discussed in the proposal and in more detail in Section III, greatly exceeded the ability of manufacturers to improve the fuel economy of their ICE fleets.\998\ In fact, NHTSA estimated that the gasoline- and diesel- fueled passenger car fleet would not be able to comply with the standard in any year from MYs 2027-2031, with anywhere from 47 to 77 percent of the fleet out of compliance during those years. Similarly, NHTSA estimated that 91 percent of the gasoline- and diesel-fueled light truck fleet would not be able to comply with the MY 2027 standards, again most likely because of the overly stringent standards in MYs 2024-2026. By MY 2031, NHTSA projected the disparity between the standards and compliance would decrease, more so for non-passenger automobiles, likely because of the two years of flat standards. However, NHTSA projected the gasoline- and diesel-fueled passenger car fleet to miss the No-Action Alternative standards by more than three mpg in MY 2031.

\997\ Manufacturers that were projected to comply include Mazda, Mitsubishi, and Toyota.

\998\ The stringency of the MYs 2024-2026 standards was one reason why NHTSA held non-passenger automobile standards flat in MYs 2027-2028 in the 2024 final rule. See 89 FR 52540, 52848 (June 24, 2024) (“Further stringency increases at a comparable rate, immediately on the heels of the increases for model years 2024-2026, may therefore be beyond maximum feasible for model years 2027- 2032.”).

NHTSA concluded that it was apparent that the existing standards depended upon the imputed fuel economy performance of EVs and PHEVs that NHTSA assumed would be manufactured in the relevant model years in contravention of both subsection 32902(h) and of the design and purposes of the CAFE program to avoid setting standards that cannot be met feasibly with gasoline- and diesel-fueled vehicles as part of a push toward alternative powertrains.

NHTSA observed that automakers are unable to meet the current standards without shifting significant capacity to EVs or purchasing credits from EV manufacturers, and that automakers could therefore not continue to produce at volume the full range of ICE-driven passenger cars and light trucks that American consumers continue to want and need. Many of the gasoline- and diesel-powered vehicle models would be unsustainable for manufacturers to produce under the existing standards, and it is unlikely that an EV alternative could provide the same performance, utility, or recreational value at a comparable price (or at all). Thus, NHTSA concluded in the proposal that the existing CAFE standards do not meet market demand, do not preserve consumer choice, and do not recognize the economic realities of the auto industry. The agency noted that automakers are free to invest in the production of EVs in response to market demand, but NHTSA's fuel economy standards should not compel them to do so; such industry- transforming regulatory compulsion is inconsistent with EPCA.

In addition, NHTSA detailed in the proposal how the analyses supporting the existing standards failed to consider countervailing costs to manufacturers, consumers, and society that may have led the agency to conclude that such stringent standards were in fact not feasible. NHTSA explained that the agency had substantially underestimated the technological costs the standards are expected to impose on manufacturers, including the direct expenditures made to redesign and reconfigure gasoline- and diesel-powered vehicles attributable to the acceleration in EV production caused by the regulatory force of the CAFE standards.\999\ Nor did the agency's economic analysis adequately consider the dramatically different supply chain and manufacturing implications of such an acceleration.\1000\ NHTSA stated that the agency underestimated the costs that the typical American would incur in owning and operating an EV (including, among others, charging costs, repair costs, battery-replacement costs, and insurance costs) as compared to the costs of owning and operating a gasoline- or diesel-powered vehicle. And NHTSA failed to quantify in its main analysis of maximum feasible standards costs to consumers from forgone features, including vehicle performance.

\999\ See, e.g., Isidore, C., Ford Just Reported a Massive Loss on Every Electric Vehicle It Sold, last revised: Apr. 25, 2024, CNN, available at: https://www.cnn.com/2024/04/24/business/ford-earnings-ev-losses (accessed: May 28, 2026); Miller, C., GM's Electric Vehicles Finally Earned More Than They Cost to Make, Car and Driver, last revised: Jan. 29, 2025, Car and Driver, available at: https://www.caranddriver.com/news/a63608612/gm-stops-losing-money-on-evs/ (accessed: May 28, 2026) (noting that GM's “variable profit positive” metric does not include “fixed costs such as creating new assembly lines, so GM's massive investments in its EV factories and the engineering of the new models are taken out of the equation.”). The production costs of EVs greatly exceed the manufacturers' current EV sales revenues and are cross-subsidized by the sale of gasoline- and diesel-powered vehicles. If the production of EVs actually did increase at the rate previously projected by NHTSA, which would require an unrealistic jump in consumer demand for EVs, automakers would no longer be able to subsidize the full extent of their losses on EVs through price increases on gasoline- and diesel-powered vehicles.

\1000\ Manufacturers cannot easily add a new production line to an existing assembly facility to produce an EV, given differences in manufacturing processes and facility needs. Instead, manufacturers generally either convert an existing facility away from internal combustion vehicle assembly or build a new facility--adding to overall costs and reducing production capacity for internal combustion vehicles. Similarly, suppliers cannot simply add a propulsion battery production line to an existing facility, and much of the expertise and intellectual property for such technologies exists overseas--especially in China. These all add substantial expense for manufacturers, which is passed along to consumers in the form of higher prices.

NHTSA also outlined that the additional costs to society more generally (not borne just by EV purchasers) include the costs associated with the massive and rapid national buildout of charging infrastructure and

electricity generation and transmission capacity necessary to accommodate the anticipated ramp up in EV sales,\1001\ and the safety concerns accompanying lithium battery fires,\1002\ specifically including costs incurred by State and local governments and first responders to prepare for and respond to the unique circumstances surrounding battery-related fires and emergency situations that will follow from more EVs on the road.\1003\ Most importantly, NHTSA concluded that using the CAFE program to push automakers into producing EVs more rapidly than market demand would otherwise support undermines one of the national security goals behind EPCA because it moves the United States into a position of greater strategic dependence on foreign suppliers of critical automotive inputs, including the processed minerals needed for the manufacture of EV batteries. Such additional societal costs are avoided in the present final rulemaking, which is based on a faithful implementation of EPCA without improperly considering the factors prohibited by section 32902(h).

\1001\ 87 FR 25888 (May 2, 2022). As the agency conceded in the previous rulemaking, there are massive costs involved with not only converting the fleets, but also the “ancillary costs of electric vehicles, such as building additional charging stations [and] improving the grid.” This includes costs borne by utility companies, and passed on to rate payers, to expand infrastructure to support an increased number of households charging vehicles at home or charging locations at private businesses or public locations-- including high-powered DC fast charge equipment.

\1002\ While internal combustion vehicles are also susceptible to fire risks (generally after a very severe high-speed crash), the risks presented by electric vehicle battery fires is on a significantly higher scale and can be presented in surprising situations. See, e.g., Institute for Energy Research (IER), Hurricane Ian Is not a Friend of Electric Vehicles, last revised: Oct. 20, 2022, available at: https://www.instituteforenergyresearch.org/renewable/hurricane-ian-is-not-a-friend-of-electric-vehicles/ (accessed: May 29, 2026). As happened in Hurricane Ian, during emergencies, these battery fires can force “local fire departments to divert resources away from hurricane recovery to control and contain the fires.” And these “fires can become life-threatening if water-damaged electric cars are parked near houses or in garages. Some Florida homes were lost to fires caused by flooded electric vehicles.”

\1003\ See Larsson, F. et al., Toxic fluoride gas emissions from lithium-ion battery fires, Scientific Reports, Vol. 7: 10018 (2017), available at: https://doi.org/10.1038/s41598-017-09784-z (accessed: May 29, 2026). While electric vehicle fires occur less frequently than conventional vehicle fires on a fleet-wide basis, when lithium- ion battery thermal runaway events do occur, they generate intense heat and toxic fluoride gas emissions, making them more difficult to extinguish than conventional vehicle fires and increasing the costs and management challenges of maintaining effective first responder capabilities. See also International Association of Fire Chiefs (IAFC), IAFC's Fire Department Response to Electric Vehicle Fire's Bulletin, available at: https://www.iafc.org/topics-and-tools/resources/resource/iafc-s-fire-department-response-to-electric-vehicle-fires-bulletin (accessed: May 29, 2026). The unique operational hazards associated with suppressing these batteries are forcing fire departments around the country to expend significant resources to purchase equipment capable of managing prolonged and unpredictable battery fires.

For those reasons, NHTSA concluded that the existing fuel economy standards for each of the model years covered in the proposal did not comply with the requirements of EPCA and the goals in EPCA for the CAFE program. NHTSA stated that, rather, the existing standards have undermined those goals, harming the freedom and economic interests of America's families, significantly degrading highway safety in all regions of the country, weakening the vitality of the U.S. auto industry, lessening the Nation's security by increasing America's strategic dependence on other countries for EV battery materials, and exacerbating the vulnerabilities of America's electricity grid. NHTSA determined that each of the factors discussed above in isolation would warrant the amendment of the prior standards. Accordingly, NHTSA proposed to set aside the previous light-duty fuel economy standards established for MYs 2022-2026 and MYs 2027-2031 and considered anew the “maximum feasible” replacement standards for the model years in question.

The agency received extensive and detailed comments regarding the legal, economic, and practical merits of the prior CAFE standards, and whether the agency's proposal to amend them was justified. Toyota Motor North America, Inc. (Toyota), NADA, SEMA, the National Association of Manufacturers (NAM), PMI, and AmFree and Corn Growers Associations, among others, commented that the prior CAFE standards contravened subsection 32902(h) by considering EVs in the regulatory baseline.\1004\ NADA asserted that by doing so, NHTSA's 2024 final rule violated EPCA and distorted the fuel economy standards, pushing them beyond what could be achieved with traditionally fueled vehicles.\1005\ Stellantis similarly commented that by including alternative-fueled vehicles in the baseline analysis, “the fuel economy capabilities of the fleet were exaggerated, and led to standards that were overly aggressive and inconsistent with Congressional intent.” \1006\ Likewise, AmFree and Corn Growers Associations noted that the presence of EVs raised the fleetwide average to a level that ICE vehicles could not achieve,\1007\ and IER stated this allowed standards to reach technologically infeasible levels for liquid-fueled vehicles, resulting in a de facto EV mandate because producing EVs became the only possible way for automakers to comply.\1008\ A joint comment from NACS et al. also agreed with NHTSA's conclusion that the agency exceeded its statutory authority in prescribing the current standards by considering EVs in a manner that was unlawful.\1009\

\1004\ Toyota, Docket No. 2025-0491-5997, at 2; NADA, Docket No. NHTSA-2025-0490-0036, at 5-6; SEMA, Docket No. 2025-0491-5891, at 2; NAM, Docket No. NHTSA-2025-0491-4970, at 2; PMI, Docket No. NHTSA- 2025-0491-5001-A2, at 13; AmFree and Corn Growers Associations, Docket No. NHTSA-2025-0491-6000-A1, at 6.

\1005\ NADA, Docket No. NHTSA-2025-0490-0036, at 5-6.

\1006\ Stellantis, Docket No. NHTSA-2025-0491-5968-A1, at 5.

\1007\ AmFree and Corn Growers Associations, Docket No. NHTSA- 2025-0491-6000-A1, at 6.

\1008\ IER, Docket No. NHTSA-2025-0491-6029, at 3.

\1009\ NACS et al., Docket No. 2025-0491-6034, at 2.

Furthermore, several commenters stated that the prior standards represented an unlawful substitution of policy judgment that violated the major questions doctrine. AmFree and Corn Growers Associations, along with API and American Consumer Institute (ACI), asserted that the prior standards violated the major questions doctrine by attempting to force a transition in the U.S. economy to electric vehicles without clear Congressional authorization.\1010\ Similarly, an individual commenter stated that NHTSA's previous fuel economy standards mirrored the EPA's Clean Power Plan, which was struck down by the Supreme Court in West Virginia v. EPA.\1011\ The commenter asserted that using fuel economy standards to force a nationwide transition from gasoline- powered vehicles to electric vehicles represents an unconstitutional expansion of regulatory authority not delegated by Congress.\1012\ Joint States and ACI commented that the prior rules unlawfully pursued a climate-focused agenda that ignored EPCA's energy conservation purpose and the realities of consumer demand.\1013\

\1010\ AmFree and Corn Growers Associations, Docket No. NHTSA- 2025-0491-6000-A1, at 13; API, Docket No. NHTSA-2025-0490-0053, at 3; ACI, Docket No. 2025-0491-4892, at 2.

\1011\ Diana Furchtgott-Roth, Docket No. NHTSA-2025-0491-5765- A1, at 2.

\1012\ Id. at 2-4.

\1013\ Joint States, Docket No. NHTSA-2025-0491-6017, at 1; ACI, Docket No. NHTSA-2025-0491-4892, at 2.

Beyond the statutory interpretation concerns raised above, in addition to commenters noting that the previous stringency levels pushed far beyond what internal combustion engine

technologies could achieve, Toyota noted the prior rules compelled an unrealistic 47-percent EV market share by MY 2031.\1014\ NADA and Nissan highlighted that EV sales flatlined in late 2025 following the expiration of IRA tax credits, causing unsold EV inventories to surge to a 149-day supply, and forcing automakers to take billions in write- downs.\1015\ Stellantis similarly commented that “2024MY and 2025MY light-duty EV growth has remained flat, even showing some signs of decline despite even more EV models entering the market.” \1016\

\1014\ Toyota, Docket No. NHTSA-2025-0491-5997, at 2.

\1015\ NADA, Docket No. NHTSA-2025-0490-0036, at 2; Nissan, Docket No. NHTSA-2025-0491-5857, at 3.

\1016\ Stellantis, Docket No. NHTSA-2025-0491-5968, at 3.

Commenters such as NACS et al., ACI, the ID, MT, ND, SD, and WY DOTs, and an individual commenter emphasized that EVs remain impractical for many Americans due to long charging times, cold weather range degradation, and inadequate rural infrastructure.\1017\ Other commenters also raised safety concerns regarding EV performance in cold weather, noting that significant range loss in winter creates hazards for drivers in mountainous or remote areas.\1018\ The Congressional Western Caucus and NADA added that forced electrification drove the average transaction price of new vehicles to nearly $50,000, pricing middle-class families out of the market.\1019\ Furthermore, PMI pointed to NHTSA's modeling indicating that without EVs, less than 14 percent of the conventional ICE fleet could meet the prior MY 2031 targets, proving they were not technologically feasible for gas-powered vehicles.\1020\

\1017\ NACS et al., Docket No. NHTSA-2025-0491-6034, at 6; ACI, Docket No. NHTSA-2025-0491-4892, at 6; ID, MT, ND, SD, and WY DOTs, Docket No. NHTSA-2025-0491-4948, at 1-2.

\1018\ ID, MT, ND, SD, and WY DOTs, Docket No. NHTSA-2025-0491- 4948, at 1-2; Diana Furchtgott-Roth, Docket No. NHTSA-2025-0491- 5765-A1, at 10.

\1019\ U.S. Congressional Western Caucus (USCWC), Docket No. NHTSA-2025-0491-6066, at 1; NADA, Docket No. NHTSA-2025-0490-0036, at 7.

\1020\ PMI, Docket No. NHTSA-2025-0491-5001-A2, at 29.

Commenters supporting the proposal also focused on how the prior standards negatively impacted investments in traditional energy sectors. NACS et al. commented that the prior standards threatened to chill multi-decade investments in liquid fuel infrastructure (such as tanks, terminals, and pipelines) by signaling the intended obsolescence of liquid fuels.\1021\ They stated that returning the CAFE standards to a focus on vehicles that consume fuel provides the regulatory clarity needed for private-sector capital to flow into refueling infrastructure that benefits every driver.\1022\

\1021\ NACS et al., Docket No. NHTSA-2025-0491-6034, at 5.

\1022\ Id. at 6.

Several commenters also agreed with the agency's assessment of the societal and security costs imposed by the prior standards. NACS et al. commented that other Federal analyses emphasized diversified energy pathways during grid disruptions.\1023\ PMI commented that forced electrification exacerbates vulnerabilities in a struggling national electricity grid and increases the risk of foreign attacks on domestic power infrastructure.\1024\ ACI similarly noted that widespread EV adoption requires significant upgrades to power distribution systems, the costs of which are passed on to utility ratepayers in the form of higher base rates.\1025\

\1023\ Id.

\1024\ PMI, Docket No. NHTSA-2025-0491-5001-A2, at 37.

\1025\ ACI, Docket No. NHTSA-2025-0491-4892, at 5.

Conversely, commenters opposing the agency's proposal stated that the current rulemaking violates the APA and EPCA. South Coast AQMD and Save the Sound argued that the agency's characterization of the prior standards as unlawful relied on unsupported suppositions and an interpretive rule that bypassed notice-and-comment procedures, failing to provide the robust administrative record required to reverse prior factual findings.\1026\ The Attorneys General contended that the agency's rationale was pretextual, driven not by statutory factors but by recent Executive Orders.\1027\

\1026\ South Coast AQMD, Docket No. NHTSA-2025-0490-0064, at 1- 2; Save the Sound, Docket No. NHTSA-2025-0490-0060, at 2-3.

\1027\ Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 112-114.

Commenters also defended the feasibility of the prior standards and the growing demand for EVs. ZETA submitted data from three reports showing that EV battery costs have decreased by 90 percent since 2010, which they asserted brings the total cost of ownership (TCO) below that of comparable ICE vehicles.\1028\ Several commenters also disputed the agency's statements regarding waning demand for more fuel efficient vehicles, including EVs,\1029\ with the ME DEP noting that EV sales reached record highs in late 2025.\1030\ Furthermore, NRDC et al. and ICCT argued that the prior standards did not force electrification; NRDC et al. submitted analyses demonstrating that automakers could meet the prior targets by shifting production to the most efficient ICE and hybrid trims they already offer, and ICCT commented that BEVs are present regardless of the existence of CAFE standards, as automakers have made investments and consumers are demanding them.\1031\ Consumer Reports added that weakening the standards denies consumers thousands of dollars in guaranteed lifetime fuel savings in exchange for theoretical sticker-price cuts that historical data suggests will never materialize.\1032\ Finally, several commenters stated their belief that weakening fuel economy standards would undermine U.S. global competitiveness and remove incentives for domestic innovation, causing automakers to stall technological advancement or shift production to other markets, which would ultimately cede the next generation of automotive manufacturing and global market share to foreign competitors.\1033\

\1028\ ZETA, Docket No. NHTSA-2025-0491-6039-A1, at 7 (citing BloombergNEF, December 2025; Atlas Public Policy, June 2025; ICCT, July 2025).

\1029\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 77- 81; ZETA, Docket No. NHTSA-2025-0491-6039-A1, at 7-9; Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 29-34.

\1030\ ME DEP, Docket No. NHTSA-2025-0490-0026, at 5.

\1031\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 33; ICCT, Docket No. NHTSA-2025-0491-5240-A2, at 17.

\1032\ Consumer Reports, Docket No. NHTSA-2025-0491-5926-A1, at 1.

\1033\ Anonymous, Docket No. NHTSA-2025-0491-5040; Cleveland, Docket No. NHTSA-2025-0491-4840, at 2; ICCT, Docket No. NHTSA-2025- 0491-5240-A2, at 21; NRDC et al., Docket No. NHTSA-2025-0491-5928- A2, at 2; AVE, Docket No. NHTSA-2025-0490-0033, at 4-5.

Several commenters stated that the agency arbitrarily ignored reliance interests and sunk costs engendered by the prior rules. MEMA, AVE, NRDC et al., ZETA, and ICCT asserted that automakers and component suppliers made billions of dollars in long-lead, irreversible investments based on the regulatory certainty of the previous rules.\1034\ NRDC et al. presented data showing that $209 billion has been invested in EV supply chain facilities currently in operation or under construction.\1035\ ICCT provided a detailed accounting showing that major automakers have committed nearly $70 billion by 2030 to retool U.S. plants for

advanced ICE, extended-range electric vehicles (EREVs), and hybrids to meet the prior standards.\1036\ ZETA and NRDC et al. also argued that the proposal to eliminate inter-manufacturer credit trading selectively harms EV-only manufacturers by devaluing hundreds of millions of dollars in compliance credits they relied upon as part of their business models.\1037\ Finally, Sabin et al., the Colorado Energy Office and Colorado Department of Transportation (Colorado state agencies), and the Attorneys General outlined public and private investments in nationwide charging networks (such as National Electric Vehicle Infrastructure (NEVI) formula funding and municipal building codes) that rely on a growing EV fleet they claim will be severely undermined by less stringent standards.\1038\

\1034\ MEMA, Docket No. NHTSA-2025-0491-5989, at 5; AVE, Docket No. NHTSA-2025-0490-0033, at 4; NRDC et al., Docket No. NHTSA-2025- 0491-5928-A2, at 2, 11, 104, 106-109; ZETA, Docket No. NHTSA-2025- 0491-6039-A1, at 12; ICCT, Docket No. NHTSA-2025-0491-5240-A2, at 20-21.

\1035\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 107.

\1036\ ICCT, Docket No. NHTSA-2025-0491-5240-A2, at 21.

\1037\ ZETA, Docket No. NHTSA-2025-0491-6039-A1, at 13-15; NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 107-110.

\1038\ Sabin et al., Docket No. NHTSA-2025-0491-5808, at 9-10; Colorado State Agencies, Docket No. NHTSA-2025-0491-4975, at 2; Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 35-36.

Several commenters criticized the agency's findings regarding the societal and safety costs of the prior standards. In response to NHTSA's assertion that lithium-ion battery fires degrade highway safety, NRDC et al. and ZETA cited incident data from the U.S., Sweden, and Norway, showing that ICE vehicles catch fire at rates comparable to or even more than EVs.\1039\ A coalition of Representatives commented that overturning the prior standards will dramatically increase emissions of nitrogen oxide and particulate matter, resulting in 450 premature deaths and nearly 14,000 asthma exacerbations, worsening the affordability crisis for American households facing skyrocketing healthcare costs.\1040\ Regarding national security, ZETA and NRDC et al. challenged the agency's claim that EV production harms national security by increasing reliance on foreign critical minerals, arguing that continued dependence on global petroleum markets poses a far greater and historically established threat to U.S. security.\1041\

\1039\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 42- 45; ZETA, Docket No. NHTSA-2025-0491-6039-A1, at 8.

\1040\ Representative Matsui et al., Docket No. NHTSA-2025-0491- 6065-A1, at 2.

\1041\ ZETA, Docket No. NHTSA-2025-0491-6039-A1, at 8-9; NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 45-46.

NHTSA has considered the comments regarding its authority to revise the CAFE standards and maintains that its primary obligation is to implement EPCA as enacted. Subsection 32902(h) contains an explicit, unambiguous prohibition: the agency may not consider the fuel economy of dedicated AFVs when determining maximum feasible average fuel economy levels. NHTSA's inclusion of electric vehicles in baseline calculations for the prior standards constituted a clear legal error that resulted in standards that were premised on impermissible considerations and beyond maximum feasible. NHTSA acknowledges the agency's prior position that exclusion of electric vehicles in the baseline would underestimate the standards that manufacturers could meet by making additional improvements to their gasoline- and diesel- powered vehicles.\1042\ In this final rule, NHTSA has reassessed the CAFE standards in accordance with the statutory text. An administrative agency possesses the authority to correct a prior erroneous interpretation of law and should not maintain a legally unsound framework. Moreover, excluding electric vehicles from the baseline does not constrain the agency's ability to issue meaningful standards reflecting maximum feasible fuel economy levels. Among other things, appropriately estimating the fuel economy value of electric vehicles using an analytically sound petroleum equivalency factor (PEF) has the potential to harmonize the standards with real-world market conditions. NHTSA's prior position failed adequately to account for the potential of the PEF to preserve meaningful fuel economy levels in such a way.

\1042\ In re NHTSA, Initial Brief for Federal Government Respondents, Case No. 24-7001, at 31-33 (6th Cir.) (Jan. 17, 2025).

In this final rule, NHTSA reassessed the CAFE standards in accordance with the statutory text. An administrative agency possesses the authority to correct a prior erroneous interpretation of law and should not maintain a legally unsound framework.

Regarding the feasibility of the prior standards, though some commenters stated that manufacturers could achieve compliance through advanced internal combustion engine refinements and hybrid configurations alone, the agency's modeling presented in the proposal and this final rule demonstrates that--regardless of balancing factors--there would be significant under-compliance with the existing standards based on the capability of the gasoline- and diesel-powered vehicle fleet. The agency has also carefully evaluated the comments concerning reliance interests and capital investments made by automakers, component suppliers, and charging network developers under the previous rules. Nothing in this rule prohibits vehicle manufacturers that have invested in EV manufacturing from producing and selling those vehicles. With respect to non-regulated entities, such as charging equipment suppliers and State programs, NHTSA's statutory authority is strictly limited to prescribing vehicle fuel economy standards and does not extend to implications of those standards for broader infrastructure investments; the economic expectations of market actors in these sectors cannot expand the agency's defined legislative authority.

Instead, NHTSA must remain within the boundaries established by its enabling legislation. Although the proposal contained a discussion of the market, infrastructure, and economic challenges currently facing electric vehicles, similar to observations made by other stakeholders, these observations provided context on the state of the light-duty vehicle market, and do not inform the methodology used by NHTSA in this standard-setting action. In compliance with subsection 32902(h), NHTSA excluded alternative powertrains when determining maximum feasibility, ensuring that the final standards are derived solely from what is feasible and practicable for the gasoline- and diesel-powered fleet.

The analytical conclusions reached in this final rule diverge from those underpinning the 2020, 2022, and 2024 rulemakings, a result necessitated by a corrected legal framework, as discussed in this section, and an appropriate balancing of the factors for assessing maximum feasibility, as discussed in more detail below. Unlike the analyses supporting the prior standards, the baseline and simulated fleets evaluated in this analysis are restricted to avoid the unauthorized consideration of dedicated alternative fueled vehicles under subsection 32902(h). Regarding comments stating that NHTSA failed to provide a comprehensive record or factual findings related to its tentative conclusion that the prior standards were beyond maximum feasible, the agency's quantitative analysis and discussion of the No- Action Alternative in the proposal and this final rule demonstrates that the prior standards were beyond maximum feasible. NHTSA provides additional discussion regarding the results of the agency's analysis, including the results of the No-Action Alternative modeling, in the following subsection. Because the agency must evaluate maximum feasibility based on the statutory factors,

subsection 32902(h) limitations, and updated economic assumptions reflective of the current broader context, these compounding legal and factual shifts require a standard-setting determination and analysis distinct from prior administrative actions.

In sum, the overriding purpose of this reconsideration is to bring the CAFE program into compliance with subsection 32902(h). Having reviewed the legal and analytical record from the prior rules, in addition to the agency's updated quantitative and legal analysis, NHTSA has determined that, pursuant to its delegated authority, resetting the standards promulgated in 2020, 2022, and 2024 is necessary to align those standards with the statutory text. This adjustment restores the program to its proper statutory text-based foundation, ensuring that fuel economy targets remain strictly within the parameters authorized by EPCA. 2. Considerations Justifying the Final Standards

NHTSA discussed in the proposal that EPCA authorized the Secretary of Transportation (and NHTSA by delegation) to prescribe maximum feasible fuel economy standards for the light-duty vehicle fleet, and to exercise discretion in weighing the factors for determining maximum feasibility in section 32902(f): technological feasibility, economic practicability, the need of the United States to conserve energy, and the effect of other motor vehicle standards of the Government on fuel economy. For the proposal, NHTSA examined three regulatory alternatives that, in addition to the No-Action Alternative, represented distinct ways the agency could balance the four factors, consistent with the subsection 32902(h) prohibition on considering certain factors when setting maximum feasible standards.

NHTSA also discussed in the proposal that the agency considered other aspects of the statute in formulating the proposal's three regulatory alternatives. One original aspect of the CAFE program that the agency had abandoned in the development of existing standards is the concept of “steady progress.” EPCA's original provision for the MYs 1981-1984 standards included a requirement that the agency's standards “will result in steady progress toward meeting” the statutorily established “standard . . . for model year 1985.” \1043\ EISA amended EPCA to include a similar provision for MYs 2011-2020 standards to “increase ratably” to the statutorily prescribed 2020 level.\1044\ While EPCA does not include the same requirement for standards applicable to MYs 2021-2030, NHTSA stated in the proposal that small, steady, incremental increases in fuel economy standards over time, while preserving the ability for manufacturers to focus on safety, affordability, and consumer choice, are reasonable and balance EPCA's priorities appropriately. Further, NHTSA stated that while the agency cannot consider the availability of credits or credit trading in establishing standards, eliminating the credit trading system beginning with MY 2028 would encourage manufacturers to provide for steady improvement in fuel economy across their gasoline and diesel-fueled fleets over time, as opposed to abandoning such improvements in favor of transition to EVs or relying upon credits acquired from third-party EV manufacturers to cover non-compliance with unattainable standards.

\1043\ Public Law 94-163, sec. 502(a)(3)(B), 89 Stat. 871 (Dec. 22, 1975).

\1044\ 49 U.S.C. 32902(b)(2).

The three regulatory alternatives increased standards at modest rates beginning in MY 2022. In support of the agency's proposed Preferred Alternative, Alternative 2, NHTSA examined several quantitative outcomes from the CAFE Model analysis, including estimates of technology penetration rates, manufacturer compliance levels compared to the standards, technology cost decreases, sales, labor, and safety measures, and changes in both estimated fuel use and changes in the pollutants emitted from vehicles as a result of changes in fuel use. The agency also discussed qualitatively several factors, including consumer demand for different types of vehicles and vehicle technologies, the tradeoffs between higher upfront vehicle prices and encouraging incremental technology improvements to spread throughout the fleet more quickly, and, importantly, whether there was a continued need for the United States to push for higher fuel economy standards given the Nation's status for several years as a net energy exporter.

The agency received extensive comments regarding its overall determination of maximum feasible fuel economy levels and how it balanced the statutory factors. AFPM noted that Congress intended the agency to set attainable standards that balance national energy needs with technological and economic realities, without imposing impossible burdens or limiting consumer choice.\1045\ The Competitive Enterprise Institute (CEI) supported the agency's decision to weigh the Nation's need to conserve energy less heavily, pointing to diminishing returns from higher standards, rising domestic petroleum production, and an unaffordable new car market as valid justifications for setting standards at the proposed levels.\1046\ CEI noted that large percentages of the fleet could not meet the existing MY 2022 standards, necessitating a rollback driven by the statutory restriction on considering alternative fueled vehicles.\1047\ AmFree and Corn Growers Associations similarly commended the agency for prioritizing vehicle affordability and safety, arguing that the removal of the electric vehicle baseline correctly aligned the program with statutory constraints.\1048\ AmFree and the Corn Growers Associations also recommended that the agency go even further than the proposed alternatives and adopt a zero percent stringency increase to protect American families.\1049\

\1045\ AFPM, Docket No. NHTSA-2025-0491-5964-A2, at 2.

\1046\ CEI, Docket No. NHTSA-2025-0491-6038, at 13.

\1047\ Id.

\1048\ AmFree and Corn Growers Associations, Docket No. NHTSA- 2025-0491-6000-A1, at 7.

\1049\ Id. at 10.

NACS et al. submitted comments regarding the analytical baseline used to calculate the costs and benefits of the rule.\1050\ They recommended that the agency present the MY 2021 standards as a primary or alternative No-Action baseline, rather than the existing MY 2022- 2031 standards.\1051\ They argued that because the existing standards are legally flawed, using them as a baseline creates incongruities in the analysis, whereas reverting to the MY 2021 standards would better reflect actual implementation and align with longstanding agency practice and administrative guidance.\1052\

\1050\ NACS et al., Docket No. NHTSA-2025-0491-6034, at 8-10.

\1051\ Id.

\1052\ Id.

Conversely, the agency received several comments arguing that the proposal unlawfully deprioritized energy conservation. NRDC et al., ZETA, and the Attorneys General stated that the fundamental, overarching purpose of the statute is energy conservation, and that the agency impermissibly elevated what they consider non-statutory factors such as safety, affordability, and consumer choice over this explicit goal.\1053\

Furthermore, the Attorneys General commented that the agency reversed its long-held position that conserving energy provides massive economic, environmental, and national security benefits, arguing that this reversal was executed without adequate acknowledgment or explanation.\1054\ NRDC et al. also commented that the agency's focus on correcting perceived market distortions misunderstands the fundamental purpose of the fuel economy program, which is designed to address market failures by pushing automakers to apply more fuel-saving technology than market forces alone would dictate.\1055\

\1053\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 46- 50; ZETA, Docket No. NHTSA-2025-0491-6039-A1, at 5; Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 59-62, 89-92.

\1054\ Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 56-57.

\1055\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 47.

The agency also received several comments that the proposed stringency levels fell far below the fleet's demonstrated capabilities, which violated the statutory requirement to set maximum feasible standards.\1056\ Similarly, several commenters pointed out that the proposed targets are weaker than what the gasoline and diesel fleets have already achieved.\1057\ Based on the existing vehicle classification regulations, the Attorneys General noted that the MY 2024 passenger car and light truck fleets achieved 41.2 mpg and 30.5 mpg respectively, yet the proposal would require only 37.4 mpg and 28.6 mpg for the reclassified fleet by MY 2031.\1058\ AVE commented that the statute requires maximum feasible improvements and does not permit the agency to default to incremental adjustments or prioritize compliance convenience over petroleum savings.\1059\

\1056\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 47; ZETA, Docket No. NHTSA-2025-0491-6039-A1, at 4; Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 38-39, 50.

\1057\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 48; ZETA, Docket No. NHTSA-2025-0491-6039-A1, at 4; Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 50.

\1058\ Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 49-50.

\1059\ AVE, Docket No. NHTSA-2025-0490-0033, at 2.

Furthermore, NRDC et al. and the Attorneys General emphasized that the agency's modeling projected significant over-compliance by the gasoline and diesel fleets, relative to the proposed standards.\1060\ The Attorneys General pointed to data in the proposal showing that the modeled fleet is projected to outperform the new standards by anywhere from 2.7 to 17.4 mpg.\1061\ NRDC et al. and UCS submitted comments that, based on the agency's assumptions, the proposed standards would have the exact same effect on fleet fuel economy as a one mile-per- gallon standard, effectively providing no regulatory incentive for improvement and rendering the standards a mere nullity.\1062\

\1060\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 66- 68; Attorneys General, Docket No. NHTSA-2025-0491-6064-A2 at 49-50, 55-56.

\1061\ Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 55-56.

\1062\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 48; UCS, Docket No. NHTSA-2025-0491-6027-A1, at 50.

Finally, NRDC et al. commented on what they perceived to be a lack of explanation regarding the agency's balancing of the statutory factors.\1063\ They noted that while NHTSA claimed to have balanced the criteria appropriately, it failed to provide a reasoned explanation for how competing policy priorities were resolved to arrive at the conclusion that the proposed levels represent the maximum feasible standards.\1064\ In addition, they commented that because the agency claimed its preliminary judgment was not based on its model, the agency unlawfully failed to disclose the actual information and evidence it relied upon to make its stringency determinations, violating its obligations under the APA.\1065\

\1063\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 48- 50.

\1064\ Id.

\1065\ Id.

The standard-setting process must remain within the boundaries established by subsection 32902(h). The empirical compliance data confirming industry-wide shortfalls under the prior standard-setting framework demonstrates that past standards exceeded the level achievable by the gasoline- and diesel-powered fleet. However, NHTSA is declining to adopt a zero percent stringency increase as suggested by some commenters. By selecting a framework of predictable increases achievable through gasoline and diesel technologies, the agency achieves the maximum feasible standard by giving appropriate weight to both the need of the United States to conserve energy and the range of factors that contribute to an economically practicable standard.

Regarding comments on the agency's choice of baseline, NHTSA's selection of the analytical baseline is governed by long-standing regulatory accounting practices and the directives of OMB Circular A-4. The No-Action baseline must accurately reflect the regulatory environment that would exist in the absence of proposed agency action. Because the standards for MYs 2022-2026 and MYs 2027-2031 were formally promulgated and remain legally binding upon the regulated industry until amended or vacated, they constitute the necessary baseline for measuring the potential economic impacts of the rulemaking. The legal conclusion that the prior framework improperly incorporated AFV technologies is correct and unavoidable. Utilizing the previously codified standards as the baseline ensures a transparent accounting of the potential cost reductions, technology penetration changes, and energy conservation adjustments. NHTSA performed additional sensitivity analyses for this final rule that removed the requirement that manufacturers attempt to comply with standards for MYs 2024-2026,\1066\ and the results of that analysis are discussed below and in FRIA Chapter 9. This sensitivity analysis also allowed the modeled compliance solution to differ from the No-Action Alternative during these years.

\1066\ The analysis fleet used for this rulemaking is based on MY 2024 data and therefore any modeling solutions begin in MY 2025.

NHTSA disagrees with the premise that energy conservation must be pursued to the exclusion or minimization of the other statutory criteria--the statute quite literally instructs otherwise. While energy conservation is a foundational goal of the statute, subsection 32902(f) explicitly commands the agency to consider four distinct factors: technological feasibility, economic practicability, the need of the United States to conserve energy, and the effect of other motor vehicle standards of the Government. As discussed above, the text of the statute does not subordinate economic practicability to energy conservation. In an era of domestic petroleum abundance enabling the United States to become a net exporter of petroleum (quite different from the Nation's historical reliance upon petroleum imports from foreign adversaries during the passage of EPCA and even EISA), placing less weight upon the factor of energy conservation is reasonable, and, indeed, natural. That said, NHTSA has not disregarded the benefits of petroleum conservation, and is, in fact, placing heavier weight on this factor in selecting a more stringent final standard than proposed, as discussed further below.

NHTSA recognized in its proposal that the Preferred Alternative, Alternative 2, set standards for MY 2031 below what the fleet had achieved in

MY 2024. NHTSA explained in the proposal that besides the obvious effects of considering the subsection 32902(h) technologies in prior standards, the seemingly high compliance levels in the light truck fleet in MY 2024 are related to the current inclusion of passenger- focused vehicles in that fleet. Moving high-volume crossover and SUV models out of the light truck fleet and into the passenger car fleet structurally lowers the mathematical average of both individual regulatory fleets, even though the physical efficiency of the individual vehicles and combined fleet average fuel economy remain unchanged. Consequently, the previous classification of an overly restricted passenger car fleet alongside an overly broad light truck fleet created a structural imbalance that artificially inflated baseline fuel economy levels in each fleet, obscuring the true operational capabilities of each independent vehicle category. NHTSA also stated that it was reasonable to reset standards at levels that did not artificially inflate vehicle fuel economy capabilities, noting that that the agency had previously overestimated manufacturer ability to apply technologies based on incongruent product design cycles and manufacturing capabilities, or underestimated manufacturer needs to deploy capital for necessary reasons unrelated to fuel economy (like safety technology).

Regarding the modeling projections showing fleet over-compliance between 2.7 and 17.4 mpg, NHTSA discussed in the proposal that this outcome was driven in part by the application of technologies by the CAFE Model to comply with the unachievable MYs 2024-2026 standards embedded in the No-Action baseline. While NHTSA maintains that the MYs 2024-2026 standards constitute the appropriate No-Action baseline for purposes of the central analysis, the agency conducted supplemental sensitivity analyses that project significantly less over-compliance when the Model excludes hypothetical technology applications that manufacturers never actually integrated into their fleets. NHTSA discusses these cases in more detail below and in FRIA Chapter 9. In addition, NHTSA also recognized in the proposal that the agency must set standards applicable to the entire automotive industry; NHTSA stated that it does not intend for its proposed reset standards to penalize manufacturers that increased their fleet fuel economy values using EV or PHEV technology, which left them with a lower fleet fuel economy value when only vehicles powered by gasoline and diesel fuels are considered. Rather, NHTSA tentatively concluded that resetting standards at a level where manufacturers can respond to market demand, consider affordability, and consider safety--all while being subject to continuously increasing standards--would better reflect consumer needs and preferences, and promote a healthier and better-balanced CAFE program.

Finally, in response to NRDC et al.'s comment that NHTSA failed to disclose its exact balancing of the subsection 32902(f) factors, NHTSA reminds commenters that standards are not generated by plugging inputs into a model and receiving an objectively correct result. Instead, NHTSA undertakes a balancing process that complies with EPCA, and the reasoned decision-making required by the APA. EPCA granted the Secretary broad administrative discretion to synthesize and balance the qualitative and quantitative factors set forth in subsection 32902(f). The agency's determination represents a holistic exercise of this discretion, balancing the quantitative engineering and economic outputs of the CAFE Model against qualitative, real-world market constraints. All data inputs, baseline fleet configurations, and model parameters used to inform the agency's technical analysis were disclosed in the proposal and the accompanying technical documents. The proposal's Preferred Alternative represented the point at which the agency determined preliminarily that continuous, steady efficiency progress could be sustained against economic practicability concerns facing consumers and manufacturers, and without encroaching upon the statutory prohibitions of subsection 32902(h). The determination of what constitutes maximum feasible fuel economy levels has consistently been recognized as a fluid and dynamic inquiry based on the four statutory factors, rather than a static calculation. The agency's standard- setting methodology maintains a careful equilibrium between rigid quantitative modeling data and qualitative consideration. This long- standing analytical flexibility ensures that NHTSA can reconcile shifting macroeconomic conditions and real-world market constraints while remaining anchored within the boundaries established by Congress.

For the final rule, in response to comments and the agency's own updated analysis, NHTSA considered both the three alternatives considered in the proposal and two additional alternatives for each set of MYs, 2022-2026 and 2027-2031. The following sections discuss the agency's consideration of each factor as applied to the range of alternatives considered in the proposal, comments on the agency's analysis, and the agency's updated assessment of each factor in response to comments and the updated range of regulatory alternatives. a. Technological Feasibility

NHTSA tentatively concluded in the proposal that technological feasibility continued to be less constraining than in the past: manufacturers could comply with standards under each proposed alternative by applying existing technology to their vehicles. NHTSA noted that whether that technology could be applied to vehicles in the rulemaking timeframe and at what cost is a question of economic practicability and not technological feasibility; as NHTSA stated in 2020, all alternatives could be considered technologically feasible, but that does not mean that any of them could be maximum feasible.\1067\ Put another way, “[a]ny of the alternatives could thus be achieved on a technical basis alone if the level of resources that might be required to implement the technologies is not considered.” \1068\ However, the level of resources needed to apply those technologies and whether consumers will purchase vehicles equipped with those technologies are still prescient factors to consider, and the agency included those discussions with regard to the economic practicability of the standards.

\1067\ 85 FR 24174, 25174 (Apr. 30, 2020).

\1068\ 77 FR 62624, 63037 (Oct. 15, 2012).

The proposal evaluated baseline technology penetration and achieved fuel economy levels under the rubric of economic practicability because the agency had tentatively concluded that all technologies evaluated in the analysis are available for commercial application in the rulemaking timeframe. However, given the close intersection between projected required and projected achieved fuel economy levels and technology penetration rates, the following discussion further examines the technology penetration rates and fuel economy levels for the standards modeled in this final rule, while the discussion in Section V.C.2.b (Economic Practicability) discusses the cost of each associated level of technology application.

The proposal observed that different manufacturers had taken different pathways to fuel-economy-improving technology application, resulting in a

fleet that was relatively bifurcated in terms of technology solutions. Some manufacturers had deployed capital into EVs at the expense of ICE improvements, while others invested in hybrid powertrains. The agency noted that when evaluating the actual capabilities of the ICE fleet-- which is required by EPCA's command to base standards on vehicles powered by liquid or gaseous fuel, as defined by the statute--the data revealed significant under-compliance. The agency reasoned that this under-compliance demonstrated that the prior standards exceeded maximum feasibility, as manufacturers could only meet the targets by utilizing compliance flexibilities such as dedicated AFVs and credit transfers that NHTSA is prohibited from considering.

The proposal also discussed NHTSA's belief that prior standards forced the application of technologies that consumers may not demand. For instance, the agency noted that consumers frequently choose to deactivate stop-start (SS12V) systems when able to do so, entirely negating the technology's projected fuel economy benefits. The agency also explained that manufacturers have limited capital. Requiring manufacturers to apply expensive fuel-saving technologies that consumers do not seek requires manufacturers to sacrifice investments in vehicle safety technologies. NHTSA tentatively concluded that maximum feasible standards must allow manufacturers to deploy both proven efficiency and safety-enhancing technologies while keeping new vehicles affordable.

The agency's modeling in support of the proposal illustrated the economic impracticability of leaving the prior standards in place. The CAFE Model projected that attempting to meet the No-Action Alternative for MYs 2027-2031 without the use of EVs or PHEVs in charge-depleting mode would necessitate a massive increase in the production and sale of strong hybrid vehicles. Even with this forced hybridization, the model showed manufacturers failing to comply with the baseline standards, by more than one mile per gallon. The agency also cautioned that such aggressive hybrid penetration rates may be unrealistic. While the market share of strong hybrids has doubled since 2020 alongside rising gas prices, real-world data shows that strong hybrid penetration has historically grown by no more than approximately five percentage points year-over-year.\1069\ Because the baseline MY 2024-2026 standards increased at rates of 8 and 10 percent per year--far exceeding historical ICE technology improvement rates--the model was forced to assume unrealistic hybridization pathways. By resetting the standards, the agency projected that less effective technologies like SS12V would drop, and strong hybrids would remain a viable option for gas-price- conscious consumers, rather than required to meet overly stringent standards.

\1069\ EIA, Hybrid Vehicle Sales Continue to Rise as Electric and Plug-In Vehicle Shares Remain Flat, last revised: May 30, 2025, available at: https://www.eia.gov/todayinenergy/ detail.php?id=65384#:~:text=About%2022%25%20of%20light%2Dduty,the%20f irst%20quarter%20of%202024 (accessed: July 20, 2026).

Finally, the proposal addressed how overly stringent CAFE standards can drive adverse changes in vehicle attributes and market offerings. The agency noted that EPCA established separate categories for passenger and non-passenger automobiles to preserve consumer access to vehicles with necessary cargo and off-highway capabilities. However, past CAFE standards created market distortions by establishing a mismatch in stringency that incentivized manufacturers to alter vehicle attributes to ensure passenger-carrying vehicles would be classified as less stringently regulated light trucks.

To correct this, the agency proposed to update the regulatory class definitions, starting in MY 2028, moving many models classified as light trucks into the passenger car fleet to which they properly belong by virtue of their being designed and used primarily to transport passengers. The agency tentatively concluded that this reclassification would ensure the light truck fleet consists strictly of vehicles with attributes contemplated by the statute for non-passenger capabilities. Although this shift lowers the average fuel economy values of both individual fleets (even while leaving the actual average fuel economy of the combined fleet unchanged), the agency tentatively concluded that coupling this reclassification with a reset of the footprint coefficient curves at sustainable levels would eliminate the incentive to manipulate vehicle attributes, thereby preventing the CAFE program from improperly disincentivizing the production of affordable passenger automobiles.

The agency received several comments on technology availability and how that availability impacts the projected manufacturer-achieved fuel economy levels. Honda noted that advanced internal combustion engine technologies are capable of supporting year-over-year stringency improvements that exceed the proposed 0.25-percent floor, which they stated would provide long-term investment certainty and maintain global competitiveness.\1070\ MEMA and MECA commented that reducing stringency to the levels in Alternatives 1 or 2 would create a technological deployment gap, weakening the market signals required to sustain the domestic manufacturing of fuel efficiency technologies.\1071\ To illustrate this impact, MECA pointed to the agency's PRIA, which showed that under the proposal's Preferred Alternative, only two out of eleven ICE and powertrain technologies would see modest single digit increases in market penetration, while five would experience decreases.\1072\ MEMA recommended the adoption of Alternative 3 or a modified Alternative 3+ to preserve continuity with prior planning assumptions.\1073\

\1070\ Honda, Docket No. NHTSA-2025-0491-6013, at 9.

\1071\ MEMA, Docket No. NHTSA-2025-0491-5989, at 8-9; MECA, Docket No. NHTSA-2025-0491-5331, at 2, 4.

\1072\ MECA, Docket No. NHTSA-2025-0491-5331, at 6, 12.

\1073\ MEMA, Docket No. NHTSA-2025-0491-5989, at 9.

Several commenters also pointed to specific over-compliance projections generated by the CAFE Model within the rulemaking timeframe.\1074\ SELC highlighted that the agency expects many manufacturers to exceed their targets by 15 percent or more across all evaluated alternatives.\1075\ MECA, among other commenters, noted that projections showed industry-wide over-compliance by 11.8 mpg in MY 2027 and 6.8 mpg in MY 2031.\1076\ Given these margins, MECA recommended that the agency's projected achieved fuel economy values should be adopted as the standards.\1077\

\1074\ Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 49-50, 55-56; NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 67-68; MECA, Docket No. NHTSA-2025-0491-5331, at 3, 6; SELC, Docket No. NHTSA-2025-0490-0035, at 5; ICCT, Docket No. NHTSA-2025-0491- 5240-A1, at 14.

\1075\ SELC, Docket No. NHTSA-2025-0490-0035, at 5.

\1076\ MECA, Docket No. NHTSA-2025-0491-5331, at 3.

\1077\ Id.

AVE provided a detailed inventory of technologies already deployed at production volumes that allow vehicles to exceed the proposed targets, including advanced combustion, direct injection, turbocharging, CVTs, improved thermal management, waste-

energy recovery, engine friction reduction, start-stop systems, cylinder deactivation, and aerodynamic improvements.\1078\ NRDC et al. and Consumer Reports noted that consumer demand for highly efficient strong hybrid vehicles is expanding rapidly, adding that these configurations frequently offer superior performance, reliability, and safety compared to conventional internal combustion engine vehicles.\1079\ Regarding component-level technologies, the Attorneys General challenged the agency's assertion that consumers frequently deactivate start-stop systems, stating that the agency provided no empirical data to support this conclusion.\1080\ They further commented that the engineering capability to disable a feature manually expands, rather than restricts, consumer choice and vehicle utility.\1081\

\1078\ AVE, Docket No. NHTSA-2025-0490-0033, at 2-3.

\1079\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 78- 81; Consumer Reports, Docket No. NHTSA-2025-0491-5926-A1, at 7-8.

\1080\ Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 60-61.

\1081\ Id.

The agency has carefully evaluated the detailed technical data submitted by AVE, MEMA, and MECA regarding currently deployable, multi- pathway efficiency technologies--including advanced combustion, direct injection, turbocharging, continuously variable transmissions, engine friction reduction, and aerodynamic improvements. As discussed above, NHTSA considers these technologies in its analysis, except for technologies that the agency cannot consider under subsection 32902(h).

In response to comments suggesting that the achieved fuel economy levels should be adopted as the standards, the agency emphasizes the fundamental distinction between regulatory modeling projections and statutory mandates. The CAFE Model's optimization simulations often indicate that certain manufacturers will, for assorted reasons including baseline technology levels or product mix, outpace other individual manufacturers in the adoption of fuel-saving technologies. However, though NHTSA has long rejected a “least-capable” manufacturer approach to setting standards, converting these achieved levels into a uniform, industry-wide standard would ignore the compliance constraints faced by less capable manufacturers, which may render such average achieved levels economically impractical for substantial portions of the industry. Regarding comments about technology forcing or mandating standards, NHTSA does not mandate any technology pathway to meet standards but instead models potential cost- effective technology pathways that manufacturers could use to do so. NHTSA also discusses comments regarding “technology forcing” standards in Section V.A, above.

In response to NRDC et al. and Consumer Reports' comments on consumer technology preferences, NHTSA intends for the final fuel economy standards to align with technology application at a pace that maintains a diverse product mix and that does not incentivize the application of any technology. If manufacturers find that their consumers benefit from having SS12V technology on their vehicles, they can continue to employ it. NHTSA does not disagree that consumer demand for strong hybrid vehicles is growing; rather NHTSA's discussion in the proposal addressed whether the demand could conceivably grow as much as the results from the CAFE Model showed. As discussed in the proposal and in more detail below, the aggressive strong hybrid penetration rates are a result of the Model's applying technology to meet extremely aggressive MYs 2024-2026 standards. Because many manufacturers have not met the projected strong hybrid electric vehicle penetration rates in the pre-standard-setting years (MYs 2025 and 2026), NHTSA performed two sensitivity analyses that may more accurately model how ICE fleets added technology in those early years.

However, in response to comments and the agency's reevaluation of its regulatory analysis considering updated assumptions and information, NHTSA examined additional regulatory alternatives for the final rule analysis that resulted in increased required and projected achieved fuel economy levels, and that resulted in additional technology application.

As in the analysis presented in the proposal, the final rule analysis developed using the CAFE Model estimates a significant amount of technology application in the vehicle fleet in all simulated scenarios by assuming the prior MYs 2024-2026 standards exist in the regulatory baseline. The CAFE Model does not remove technology from vehicles in the face of less stringent standards, meaning that any technology applied by the model to reach the existing stringent MYs 2024-2026 standards (modeled in accordance with Circular A-4's definition of a “No-Action baseline”) will continue to exist in the fleet in the model for MYs 2027-2031. While manufacturers invest significant capital in developing new vehicle technologies and may try to recoup their investments, it is entirely possible that manufacturers may choose to discontinue employing particular technologies earlier than anticipated or may price their vehicles in a way that would shift sales from a vehicle model using one technology to a vehicle model using another when faced with the proposed standards. NHTSA presents technology penetration rates for MYs 2027-2031 below but recognizes that manufacturers' responses to standards will be different in ways that the simulated analysis cannot capture.

The CAFE Model projections for MY 2031 demonstrate specific adjustments in fleetwide technology penetration rates across the regulatory alternatives relative to the No-Action baseline. The largest adjustments occur in SHEV penetration, which declines by 25 to 30 percent under Alternatives 1 through 4, compared to a 3.6-percent reduction under Alternative 5. PHEV penetration rates decrease consistently by approximately five percent across all action alternatives. For conventional powertrains, HCR engine technology increases by a few percentage points beginning in MY 2027, the first standard-setting year, in all options except the No-Action baseline and Alternative 5, while basic engine and advanced gasoline technologies decrease across all scenarios. Turbocharged engine deployment remains stable under Alternatives 1 through 4 but decreases at similar rates under the No-Action baseline and Alternative 5. In addition, the application of the highest-level road load reduction technologies decreases from the baseline to the lower alternatives but increases progressively as the regulatory alternatives become more stringent, with the exception of the highest levels of high rolling resistance tires, which are applied at consistent levels across the alternatives.

Table V-2 shows selected technology penetration rates for each alternative. BILLING CODE 4910-59-P

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The proposal discussed reasons why the modeled hybrid penetration rates would likely not come to pass. For the final rule, NHTSA performed two additional sensitivity analyses, one assuming that standards in MYs 2024-2026 were set to 1 mpg and allowing the action alternative solutions to differ from the No-Action Alternative during those years, and one capping SHEV technology adoption rates at 25 percent by MY 2030 and PHEV technology adoption rates at two percent by MY 2030.

Table V-3 shows technology penetration rates with a 1 mpg standard for MYs 2024-2026, which effectively assumes that manufacturers did not attempt to comply with the prevailing CAFE standards in those years and instead only applied the technology the Model deemed cost effective-- i.e., adding technology that would pay for itself in projected fuel savings within the initial 36 months of use. BILLING CODE 4910-59-P

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Even though the Model assumes that hybrid technology is cost effective to apply, manufacturers have not broadly applied SHEV or PHEV technology at rates reaching the levels estimated in the analysis, for various reasons including alternative compliance pathways. For instance, while SHEVs make up 50 percent of Toyota's MY 2024 fleet, GM's MY 2024 fleet consists of 0.05 percent SHEVs; the average SHEV penetration across an OEM's fleet is 4.6 percent.\1082\ As such, NHTSA also performed a sensitivity case examining what a cap on modeled hybrid and PHEV technology penetration rates would mean for the application of other ICE technologies. Table V-4 shows a technology penetration rate using a phase-in cap for SHEV and PHEV technology.\1083\ Further discussion on this sensitivity case can be found in FRIA Chapter 9.2.5.

\1082\ These values report SHEVs as a share of manufacturers' gas- and diesel-powered fleets (i.e., excluding EVs).

\1083\ Phase-in caps and the phase-in start year determine the maximum adoption rate for a given technology in a particular model year. Phase-in caps do not dictate how much a technology is applied by the model; rather, they represent how much of the fleet could have adopted the technology by a given model year. Note that phase- in caps limit technology adoption but not necessarily the maximum technology penetration. For instance, consider a phase-in cap on SHEVPS technology of 0.5 percent per year with a phase-in start year of MY 2000. For an OEM that does not have any SHEVPS vehicles in its MY 2024 fleet, their maximum SHEVPS adoption is limited to 13 percent in MY 2025 (i.e., 0.50 percent year over year accruing for 26 years, MY 2000 to MY 2025). However, if an OEM has 50 percent SHEVPS vehicles in their MY 2024 fleet, with a phase-in cap of 0.50 percent per year, it is limited to 51 percent SHEVPS adoption in MY 2026.

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As expected, capping the SHEV penetration rate results in SHEV penetration levels more in line with expected levels going into MY 2027. On the other hand, NHTSA recognizes that the SHEV phase-in cap sensitivity case, like many of the cases presented in this final rule, represents a counterfactual world where manufacturers had not taken all available compliance pathways to comply with prior standards, including those pathways that NHTSA cannot consider when setting standards. SHEV adoption looks similar for Alternatives 1-3 across both sensitivity cases but increases in the non-binding MY 2024-2026 standards case as Alternatives 4 and 5 become more stringent in the standard-setting years. NHTSA expects manufacturer pathways to compliance for their gasoline- and diesel-powered fleets to fall across this range of sensitivity cases; for the half or so of manufacturers that had a robust SHEV program already, they might fall towards the central case on the spectrum, whereas the half or so of manufacturers that had pursued alternative compliance pathways that NHTSA cannot consider when setting standards would fall towards the other.

As discussed in Section II regarding compliance simulation, the CAFE Model applies technology subject to several real-world constraints, like accounting for manufacturers' product design cycles and sharing vehicle technologies across platforms. Based on a combination of factors unique to each manufacturer, the compliance simulation ends with different manufacturers achieving different fuel economy levels relative to the standards. In addition, some manufacturers' distinct regulatory fleets (i.e., passenger car and light truck) may perform differently relative to each standard. With some exceptions, manufacturers are projected to meet or exceed standard levels in Alternative 3, the Preferred Alternative in this final rule. In the domestic car fleet, manufacturers meet targets through Alternative 4 except Ford, remaining short of target levels in MYs 2028 and 2029 before vehicle reclassification changes go into effect for MY 2030.\1084\ The imported car fleet sees similar trends in compliance across manufacturers and model years. Ford enters this fleet with reclassification in MY 2030 and achieves compliance in all action alternatives other than Alternative 5. Volvo under-complies with its targets in MY 2027 for Alternatives 2 and 3 but over-complies once sufficient vehicles are eligible for refresh and redesign in subsequent model years. Across both passenger car regulatory classes, several manufacturers fall short of compliance under the higher stringency alternatives, Alternatives 4 and 5. Most manufacturers comply with standards in the light truck fleet across alternatives and model years. JLR does not meet compliance levels in Alternatives 4 and 5, while Mercedes-Benz, Nissan, and Stellantis miss targets in Alternative 5. Figure V-1 and Figure V-2 show manufacturers' estimated compliance positions relative to the standards. The figures report over-compliance or shortfall in mpg (cell shading indicates shortfalls):

\1084\ In MY 2028, Ford's domestic car fleet represents approximately eight percent of the manufacturer's light-duty sales and contains the Mustang (five percent of Ford's light-duty sales), Corsair (two percent), and Escape (one percent). After reclassification, the Bronco Sport enters the fleet and shifts this regulatory class into compliance.

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Consistent with the analysis presented in the proposal, the tables show most manufacturers under-complying significantly in each fleet under the baseline standards. While some manufacturers' shortfalls may not seem significant, the cost to each manufacturer to reach those levels must be considered alongside performance, and that cost is discussed below in more detail regarding the economic practicability of the standards. There is also more compliance with the baseline standards in the light truck fleet, where reclassification does not occur and manufacturers can continue using vehicles built largely for passenger-carrying purposes, like CUVs, to comply with the standards.

Under the regulatory alternatives, different manufacturers would have difficulties complying depending upon fleet. There remains some over-compliance in the least stringent alternatives because the existing fleets used to establish the baseline were designed to meet extremely stringent MYs 2024-2026 standards, and there is significantly more under-compliance for individual manufacturers under the more stringent regulatory alternatives. By Alternative 5 in MY 2031, major manufacturers are unable to comply by several mpg in each regulatory fleet, particularly in the passenger car fleet, which will contain the large majority of sales volumes after reclassification in MY 2030. The over-compliance in Alternative 2 that some commenters identified in the proposal is still present for approximately half of manufacturers, whereas the other half are still projected to achieve fuel economy levels much more in line with the standard levels. In Alternative 3, that over-compliance again decreases as the standards become more stringent.

Under the two sensitivity cases discussed above (one assuming that manufacturers did not attempt to comply with the MYs 2024-2026 standards, and one that capped hybrid and plug-in hybrid technology adoption rates), compliance with standards by MY 2031 decreases significantly under the MYs 2024-2026 non-binding standards case, and to a lesser extent under the SHEV/PHEV cap case. NHTSA expects that manufacturers that used a hybrid pathway in the real world to comply with standards would see over-compliance levels more similar to these levels, whereas manufacturers that used a combination of ICE and EV technologies to comply with standards would not. BILLING CODE 4910-59-P

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Considering the central case analysis and two sensitivity cases evaluated above, NHTSA views the general over-compliance in the early years in the lower stringency alternatives not as an anomaly, but as a correction to address distortions resulting from standards that had exceeded maximum feasibility in the past. In response to standards based upon consideration of prohibited factors, manufacturers invested significant capital into fuel-saving technology that has played a significant role in heightened new vehicle costs. Providing for less stringent standards in the early years of this rulemaking is not a reflection that the standards are too low, but an acknowledgement that previous standards were too high, and that manufacturers were forced by regulation to improve fuel economy performance at rates that exceeded those that would be maximum feasible had the agency adhered to statutory restrictions. By resetting the standards to comply with statutory restrictions and appropriately balance the statutory factors, NHTSA expects that manufacturers will reduce upfront vehicle costs, enhance consumer choice, and ensure a range of vehicles are easier to manufacture. Setting maximum feasible fuel economy standards that consider economic practicability for consumers helps protect entry- level, low-margin passenger cars from disproportionate regulatory burdens. This approach directly responds to concerns raised by manufacturers of small-footprint vehicles regarding recent stringency increases, while simultaneously addressing broader economic concerns over rising new-vehicle transaction prices. This approach prevents automakers from either passing steep, front-end technology costs directly onto budget-conscious consumers or pulling entry-level models from the market entirely. As NHTSA stated in the proposal, while consumer preferences change over time, the CAFE program should not set standards that drive changes in market offerings, particularly if it drives changes that decrease market offerings that are more affordable to consumers. b. Economic Practicability

In the proposal, the agency explained that its consideration of economic practicability encompasses a broad array of elements, including available technology and application cadence, compliance shortfalls, increases in vehicle costs and resulting impacts on consumer demand, sales and employment impacts, and safety. The agency emphasized that while technological feasibility asks whether a fuel- economy-improving technology exists, economic practicability questions the economic consequences of implementing that technology in the fleet on a wide-spread basis, particularly when consumer demand for such technology is lacking.

A central focus of the economic practicability analysis presented in the proposal was vehicle affordability. The agency projected that the proposed alternatives would reduce technology costs by half compared to the baseline, saving consumers more than $900 in upfront vehicle costs by MY 2031. These upfront savings were projected to trigger cascading reductions in registration, insurance, and financing

costs. While the proposal estimated that, over a vehicle's expected lifetime, additional fuel costs would exceed these upfront savings by approximately $500 for the Preferred Alternative, NHTSA reasoned that the upfront savings would make new vehicles affordable for more consumers in the nearer term, while preserving the ability of manufacturers to produce more fuel-efficient vehicles for the consumers who demand them.

The proposal further examined how affordability improvements translated to sales, employment, and safety impacts. NHTSA projected that lower vehicle prices would increase overall sales, thereby getting Americans into newer, safer vehicles more quickly. NHTSA also observed that modeled employment impacts were estimated to change by less than one percent compared to the baseline but also noted that the agency had not highlighted the results of its analysis in recent rulemakings because of its limited scope and the uncertainty introduced by rapidly changing labor inputs for vehicle assembly and technology development.

Finally, NHTSA provided a detailed safety assessment, emphasizing that, as new vehicles become unaffordable, consumers hold onto older, less safe vehicles--a phenomenon that has pushed the average age of the fleet toward 13 years. Looking at changes in vehicle mass, fleet turnover (sales and scrappage), and vehicle miles traveled, the agency projected that the proposed reset standards would yield significant safety benefits. Specifically, the proposal estimated that the decrease in vehicle miles traveled and the accelerated entry of newer, safer vehicles into the fleet would prevent approximately 1,300 to 1,500 fatalities and hundreds of thousands of non-fatal injuries in total through CY 2050, compared to the No-Action Alternative. In addition, the agency noted that the proposed MY 2028 vehicle reclassification would reduce market distortions that had previously incentivized manufacturers to shift production from passenger cars to less stringently regulated light trucks, potentially further lessening mass disparities and improving overall safety in the light-duty fleet.

The agency received extensive comments regarding its assessment of economic practicability, with comments divided on whether the proposed regulatory alternatives appropriately balanced upfront vehicle costs, long-term fuel savings, consumer choice, employment, and safety.

Commenters supporting the proposal, including NADA and AmFree and Corn Growers Associations strongly supported the agency's focus on reducing upfront vehicle costs.\1085\ NADA highlighted that reducing the average vehicle transaction price by approximately $1,000 will significantly expand the pool of households that can afford new vehicles.\1086\ NADA also commented against relying on a TCO metric, explaining that lenders base financing decisions on loan-to-value ratios and will not extend more credit to account for future fuel savings, making upfront costs the primary barrier to vehicle access.\1087\ CPAC-CRF added higher vehicle prices, including from increased compliance costs from CAFE standards, increase the burden on working families and middle-income households.\1088\

\1085\ NADA, Docket No. NHTSA-2025-0490-0036, at 1, 10; AmFree and Corn Growers Associations, Docket No. NHTSA-2025-0491-6000-A1, at 2, 7.

\1086\ NADA, Docket No. NHTSA-2025-0490-0036, at 9.

\1087\ NADA, Docket No. NHTSA-2025-0490-0036, at 11.

\1088\ CPAC-CRF, Docket No. NHTSA-2025-0491-5054, at 5.

Conversely, several commenters, including NRDC et al., Consumer Reports, ACEEE, Lucid, and several State environmental agencies, argued that the proposal harms overall affordability by trading upfront savings for increases in long-term fuel costs.\1089\ ACEEE and Consumer Reports emphasized that low-income and rural drivers, who spend a larger percentage of their income on fuel and drive longer distances, are disproportionately harmed by less stringent standards that increase exposure to volatile gasoline prices.\1090\ Lucid contended that TCO must be the benchmark for affordability, claiming that over a typical ten-year ownership period, additional fuel expenditures under the proposed standards will run into the thousands of dollars, far exceeding the agency's estimated $900 reduction in sticker price.\1091\ Furthermore, Consumer Reports and Lucid argued that the primary drivers of rising vehicle transaction prices are industry-wide shifts toward larger, more expensive SUVs and trucks, as well as rising expenses from advanced safety systems, software, and tariffs, rather than CAFE compliance costs.\1092\

\1089\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 71; Consumer Reports, Docket No. NHTSA-2025-0491-5926-A1, at 5-6; ACEEE, Docket No. NHTSA-2025-0491-5943, at 1; Lucid, Docket No. NHTSA-2025- 0491-6043, at 8-9.

\1090\ ACEEE, Docket No. NHTSA-2025-0491-5943, at 1; Consumer Reports, Docket No. NHTSA-2025-0491-5926-A1, at 3.

\1091\ Lucid, Docket No. NHTSA-2025-0491-6043, at 8-9.

\1092\ Consumer Reports, Docket No. NHTSA-2025-0491-5926-A1, at 5; Lucid, Docket No. NHTSA-2025-0491-6043, at 8-9.

NHTSA has carefully evaluated the comments regarding the economic metrics used to measure consumer affordability. The agency agrees that exclusive reliance on a TCO metric does not account for the consumer automotive credit market, which is reliant on both consumers' liquidity constraints and underwriting practices. This is also why, in part, NHTSA stated in the proposal that the agency was exploring more appropriate ways to present the value of fuel savings, which accrue to multiple buyers over the vehicle's life, and sought comment on such alternative presentations of fuel savings that the agency could include for informational purposes in the final rule. NHTSA agrees with NADA's point that upfront vehicle costs are a primary barrier to new vehicle purchases; consequently, an incremental regulatory cost increases the upfront capital barrier, which can reduce the number of credit-eligible buyers and affect market access for consumers. If NHTSA's standards were to increase upfront vehicle costs such that consumers could not afford to purchase them, it would be more difficult for vehicles with increased fuel economy levels to enter the fleet, and for the overall fleet's average fuel economy level to increase. In addition, nothing in this rule prohibits manufacturers from producing more fuel-efficient vehicles for consumers who value fuel economy.

Although industry-wide vehicle pricing is also influenced by consumer preferences for larger vehicles, advanced safety content, and macroeconomic factors, NHTSA's economic practicability and regulatory impact assessments, performed in accordance with OMB Circular A-4, generally limit the evaluation to the specific incremental cost burdens imposed by the agency's own standards. That said, NHTSA does consider the increase in fuel costs resulting from reduced fuel economy standards as a subset of the need of the United States to conserve energy statutory factor, and not under economic practicability. The agency carefully weighed the potential impacts of upfront cost increases against the magnitude of potential increases in fuel costs from changes in the standards and cannot conclude that standards that result in a high upfront cost weigh in favor of maintaining more stringent standards. By considering upfront transaction costs within its economic

practicability analysis, the agency accounts for consumer affordability concerns that create barriers to new vehicle acquisition.

NHTSA also received several comments critical of the agency's assumption that manufacturers will pass 100 percent of compliance cost savings on to consumers in the form of lower purchase prices. NRDC et al. commented that empirical literature, including studies on asymmetric cost pass-through, suggests manufacturers frequently retain cost reductions as increased profits rather than lowering prices, particularly when absorbing other costs like tariffs.\1093\ Consumer Reports and an individual commenter presented data from a 2023 study covering MYs 2003-2021--a period of rising CAFE stringency--which found no statistically significant increase in inflation-adjusted vehicle prices, implying that automakers historically deployed fuel-saving technologies without passing net costs to consumers.\1094\ An individual commenter similarly expressed skepticism, noting that prices rarely decrease once elevated and that savings from less efficient vehicles are unlikely to materialize for the buyer.\1095\

\1093\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 71- 72.

\1094\ Consumer Reports, Docket No. NHTSA-2025-0491-5926-A1, at 5-6.

\1095\ Evans Callis, Docket No. NHTSA-2025-0491-0109.

NHTSA believes that it is reasonable to assume that changes in production costs are ultimately reflected in consumer transaction prices. As discussed in more detail in Section II in regard to the effect of new vehicle prices on vehicle scrappage, because specific vehicle pricing decisions are proprietary and inherently differ between manufacturers, modeling them is beyond the scope of this analysis. Transaction price trends between 2003 and 2021 were influenced by multiple confounding variables. Isolating the cost impact of CAFE compliance within historical retail prices is difficult due to shifts occurring simultaneously in automaker cross-subsidization of certain vehicle models, vehicle size mixes, standard equipment content, manufacturing efficiencies, dealer incentives or other pricing strategies, and global supply chain conditions. NHTSA's current approach allows the agency to isolate and evaluate the potential economic impacts of the standards on a fleetwide level, and though this may cause the agency to overestimate some individual vehicle prices and underestimate others, having confidence in the aggregate changes is most important for this analysis. NHTSA also believes the agency's approach is more appropriate than one that does not assume that manufacturers would pass on cost savings from lower CAFE standards to consumers in the form of lower vehicle purchase prices because of the basic economic principle that if manufacturers do not pass on cost savings in the aggregate, then they will be undercut by competitors. Accordingly, NHTSA's higher level, aggregated assumptions are reasonable.

The agency also received several comments on how fuel economy standards interact with consumer choice and vehicle attributes. CPAC- CRF commented that the previous rules distorted markets and reduced consumer choice by implicitly disfavoring the trucks and SUVs that American consumers legitimately need for family, work, and geographic reasons.\1096\ In contrast, the Attorneys General and NRDC et al. argued that the agency arbitrarily elevated consumer demand over the statute's primary goal of energy conservation, while simultaneously relying on unsupported assumptions about consumer preferences.\1097\ NRDC et al. disputed the agency's claim that consumers reject fuel- efficient vehicles because they lack desirable attributes, pointing to EPA data showing that vehicle HP and acceleration reached record highs alongside increasing fuel economy.\1098\ NRDC et al. also criticized the agency's reliance on particular studies to conclude that consumers fully value fuel savings, pointing to other behavioral economics research showing that consumers systematically undervalue future fuel savings due to uncertainty and information asymmetries.\1099\

\1096\ CPAC-CRF, Docket No. NHTSA-2025-0491-5054, at 5.

\1097\ Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 59-62; NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 46-50.

\1098\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 74- 75.

\1099\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 76- 81.

In determining maximum feasible standards under EPCA, NHTSA is required to consider economic practicability, which inherently encompasses an evaluation of consumer choice. While the agency recognizes that historical data shows concurrent increases in both fuel economy and performance metrics like horsepower, standards must be set so that marginal compliance costs do not restrict the vehicle attributes required by consumers. In addition, at the analytical level, NHTSA evaluates maximum feasible standards based on maintaining performance attributes of the fleet, in order to isolate the effects of changes in vehicle fuel economy. Regarding consumer valuation of fuel savings, NHTSA has recognized in several prior rules that the range of estimates presented in literature is wide. NHTSA has relied on that wide range of studies, including several recent studies, in addition to information from manufacturers to conclude that its estimates of consumer valuation of fuel savings are reasonable.

Commenters also diverged on the macroeconomic impacts of the proposal. NADA projected that a $1,000 reduction in vehicle prices, using a price elasticity of demand of -0.4, would generate approximately 130,000 additional new light-vehicle sales.\1100\ Conversely, NRDC et al. commented that vehicle sales are driven primarily by macroeconomic conditions (such as the COVID-19 public health emergency and semiconductor shortages) rather than CAFE standards, and noted that the agency's own estimated increase of 16,000 to 49,000 units represents a negligible 0.1-percent to 0.3-percent increase in total sales, which could not justify the stringency decreases.\1101\ Regarding employment, Cleveland commented that the agency's own analysis estimated a loss of full-time equivalent employment positions across the three alternatives considered in the proposal, and noted that Ohio is home to nearly 19,000 auto manufacturing jobs.\1102\ The Attorneys General commented that the agency arbitrarily failed to evaluate these employment effects in its analysis, breaking with past practice by assuming lost auto worker jobs are subsumed by other unmonetized benefits, and also by ignoring the proposal's negative impacts on employment associated with the electric vehicle sector.\1103\

\1100\ NADA, Docket No. NHTSA-2025-0490-0036, at 10.

\1101\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 73.

\1102\ Cleveland, Docket No. NHTSA-2025-0491-4840, at 2.

\1103\ Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 64-65.

NHTSA's price elasticity modeling uses a variety of parameters to estimate a sales response to incremental price changes in response to changes in standards. As discussed in more detail below regarding the results of the agency's final rule analysis, the estimated additional vehicle sales volumes are enough to increase meaningfully the rate at which older, less efficient, and less safe vehicles are retired. Regarding the labor analysis, as

noted in the proposal, NHTSA has used its approach to modeling labor effects in several recent rulemakings but had not highlighted its results because of its limited scope and the uncertainty introduced by rapidly changing labor inputs for vehicle assembly and technology development. NHTSA sought comment on alternative approaches to the labor analysis that the agency could consider, including approaches that could supplement the agency's current approach or succeed it in future rulemakings, but did not receive any suggestions suitable for inclusion in the agency's analysis. Accordingly, while the agency recognizes that mere translation of added required regulatory costs into additional labor utilization does not accurately reflect automotive labor, the labor utilization model does serve as an aggregate metric for directional tracking of total manufacturing hours directly tied to projected technology compliance costs. The agency also recognizes Cleveland's concerns about the labor utilization model's estimates but notes that these estimates represent an approximately one percent change from employment effects estimated under the existing standards, as shown in more detail below. Weighing these metrics against the other economic metrics associated with amending fuel economy standards, as the agency did in the proposal and now this final rule, contrary to the Attorneys General assertion, NHTSA concludes that the final standards represent maximum feasible standards, as discussed in more detail below. NHTSA also notes that real-world employment configurations remain dynamic and are heavily influenced by broader macroeconomic patterns, vehicle assembly locations, and international corporate choices outside the operational scope of this simulation. The agency will continue to develop an improved labor utilization model for future CAFE rulemakings.

Finally, AmFree and Corn Growers Associations commented in support of the agency's conclusion that lower vehicle prices will accelerate fleet turnover, getting consumers out of older vehicles and into newer models equipped with modern safety features like ESC and advanced driver assistance systems.\1104\ Conversely, NRDC et al. and the Attorneys General commented that the agency unlawfully categorized safety as a subset of economic practicability to elevate it above explicitly enumerated statutory factors.\1105\ NRDC et al. and Consumer Reports asserted that most of the agency's projected safety benefits do not stem from safety improvements in the vehicles, but from the assumption that people will drive fewer miles because it will be more expensive to drive under lower standards.\1106\ These commenters also contended that historical data shows automakers have consistently delivered fuel efficiency gains and life-saving safety improvements simultaneously without trading one for the other, making the agency's concerns about safety trade-offs purely speculative.\1107\

\1104\ AmFree and Corn Growers Associations, Docket No. NHTSA- 2025-0491-6000-A1, at 9.

\1105\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 82- 83; Attorneys General, Docket No. NHTSA-2025-0491-6064-A2, at 91-92.

\1106\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 83- 85; Consumer Reports, Docket No. NHTSA-2025-0491-5926-A1, at 12-13.

\1107\ NRDC et al., Docket No. NHTSA-2025-0491-5928-A2, at 81- 83; Consumer Reports, Docket No. NHTSA-2025-0491-5926-A1, at 11-13.

While modeled safety benefits stem in part from changes in total driving distance through the rebound effect, lower upfront vehicle prices accelerate fleet turnover, which delivers a distinct safety benefit by introducing modern crash-avoidance and occupant-protection features to the road more quickly. Further, though historical data demonstrates that the industry has improved both fuel economy and vehicle safety over time, the agency must evaluate the marginal impacts of the specific regulatory options under consideration. The projected safety effects reflect established economic principles regarding how vehicle price increases influence consumer purchasing decisions and overall fleet exposure.

For the final rule analysis, NHTSA considered metrics relevant to the economic practicability of the standards with the expanded suite of regulatory alternatives. Continuing from the discussion of technological feasibility, which examined the technologies applied in response to standards, and the fuel economy levels achieved by the fleet through use of those technologies, NHTSA discusses in this section the cost to apply those technologies. At the individual manufacturer level, the No-Action Alternative imposes large annual technology cost increases on manufacturers despite yielding significant under-compliance with their gasoline- and diesel fueled fleets. Per- vehicle technology costs vary widely by manufacturer and across alternatives, in part due to estimated technology application choices. Manufacturers remain free to apply any fuel economy technologies they choose, to meet the needs of their customers. Relative to the No-Action Alternative scenario, Alternatives 1 through 4 would result in an average industry-wide decrease in per-vehicle technology costs of between $1,318 and $1,135 (a decrease of approximately 50 to 60 percent), while Alternative 5 result in a decrease of $538 (a decrease of 24 percent). As discussed above, NHTSA expects that manufacturers would pass these cost reductions on to consumers. These cost reductions would have significant ripple effects in the new vehicle market, including increasing sales and fleet turnover, as discussed in more detail below.

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Under the No-Action Alternative, many manufacturers would see vehicle technology cost increases reaching or greatly exceeding $2,000, while in contrast seeing significant technology cost decreases relative to the No-Action Alternative under the regulatory alternatives. Technology cost decreases are presented for all regulatory alternatives in FRIA Chapter 8, and decreases for Alternative 3, the Preferred Alternative, are presented below for comparison. Across the industry, many manufacturers would see slight cost decreases in the early years, followed by increasing decreases by MY 2031. BILLING CODE 4910-59-P [GRAPHIC] [TIFF OMITTED] TR30SE26.212

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As NHTSA discussed in the proposal, in the face of increasing fuel economy standards under the existing rules, vehicle manufacturers have taken different approaches to adding fuel-economy-improving technology to their vehicles. Some manufacturers that invested heavily in early deployment of EVs to meet the standards set in 2024 may find themselves with gasoline- and diesel-fueled fleets with lower fleet fuel economy values. Manufacturers that invested in non-plug-in hybrid powertrains and complied only marginally with 2024's standards presumably have ICE fleets with higher fleet fuel economy values and lower associated technology cost reductions. For example, the fact that General Motors is projected to realize a $2,561 relative per-vehicle cost reduction by 2031 under the reset standards while Toyota is projected to realize a more modest $526 reduction demonstrates the effect across model years of the prior differences in powertrain technologies used in their baseline fleets. Automakers that have historically invested heavily in conventional hybrid architectures already possess highly optimized, low-cost compliance foundations, meaning the incremental transition from the No-Action Alternative to Alternative 3 provides smaller, yet still positive, relative cost reductions. Conversely, manufacturers that relied more exclusively on capital-intensive EV strategies to raise their fleet fuel economy values under previous standards are estimated to see larger technology cost reductions.

EPCA's command--to set maximum feasible fleetwide average fuel economy values for vehicles that run on “fuel” as

defined in the statute--becomes more difficult as manufacturers find themselves with different resulting potential technology costs. Analyzing whether technology can feasibly be applied to vehicles during the rulemaking timeframe, and at what cost, requires careful consideration of each individual manufacturer's technology levels and the potential economic consequences resulting from manufacturers' efforts to comply with different levels of standards.

NHTSA does not intend for its standards to penalize manufacturers that increased their fleet's fuel economy using EV technology. Rather, NHTSA recognizes that resetting standards at a level where all manufacturers can respond to market demand, consider affordability, and consider safety would better reflect consumer needs and preferences.

Alongside the significant up-front cost reduction for each of the regulatory alternatives compared to the No-Action Alternative, NHTSA expects that any standard lower than the No-Action Alternative would increase sales of the gasoline- and diesel-powered vehicles considered in the analysis. As stringency levels increase across scenarios (moving from Alternative 1 to Alternative 5) and technology costs increase, the overall magnitude of the increase in sales lessens. Sales are highest in Alternatives 1, 2, and 3, and lowest in Alternative 5. Though the sales variance across all action alternatives remains within 0.75 percent of the No-Action baseline through MY 2031, this fractional percentage represents a significant shift in absolute vehicle volumes. In a nationwide market with millions of annual transactions, a variance of nearly three-quarters of a percent translates into hundreds of thousands of additional new vehicles entering the fleet. This volume shift is meaningful as it materially accelerates the retirement of older, less efficient, and less safe models on the road. [GRAPHIC] [TIFF OMITTED] TR30SE26.213

NHTSA also estimates the employment effects of the different regulatory alternatives, as discussed above. The agency's model for estimating labor impacts in parts supply is based on the premise that any reduction in costs translates directly to an assumed reduction in labor hours, as measured in “person-years.” The agency's methodology does not account for a diversion of such labor into development or production of different technologies. Based on the agency's method for calculating labor effects, NHTSA's analysis shows a very small decrease in cumulative person years from less stringent standards relative to the baseline, in part because of the decreased need for development and application of additional fuel-economy-improving technology. Employment utilization decreases in each action alternative relative to the No- Action Alternative. Alternatives 1 and 2 show almost identical decreases in labor utilization, while for each model year, Alternative 5 sees the smallest decrease over the No-Action Alternative. Because the decrease is largest in the less stringent alternatives, this indicates that the technology effects outweigh the sales effects in the action alternatives. The impact of decreased demand for fuel economy- improving technologies is larger in magnitude than the increase in demand that results from increased vehicle sales. The trend of incremental labor utilization in the action alternatives generally follows that seen in the No-Action Alternative: the incremental difference grows until MY 2033 and then steadily declines through MY 2050.

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As NHTSA stated in the proposal, though the agency's quantitative estimates of changes in employment effects capture certain factors related to how the automotive industry may respond to lower fuel economy standards, a number of potential employment impacts from lower fuel economy standards are not captured in the analysis. As an example, the analysis does not capture the effects of manufacturers' shifting vehicle and powertrain production to the United States in response to factors other than the agency's CAFE standards.\1108\

\1108\ See The White House, TRUMP EFFECT: Mercedes to Shift More Vehicle Production to U.S., last revised: May 1, 2025, available at: https://www.whitehouse.gov/articles/2025/05/trump-effect-mercedes-to-shift-more-vehicle-production-to-u-s/ (accessed: June 12, 2026); The White House, Fact Sheet: President Donald J. Trump Incentivizes Domestic Automobile Production, last revised: Apr. 29, 2025, available at: https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-incentivizes-domestic-automobile-production/ (accessed: June 12, 2026).

The agency's safety assessment evaluates three primary elements: changes in vehicle mass, reduced crash exposure via the rebound effect, and fleet composition shifts driven by new vehicle sales and older vehicle scrappage. Across the regulatory alternatives, the overall safety impact is influenced by the rebound effect, as less stringent standards result in higher per-mile driving costs, thereby reducing total miles driven and lowering overall crash exposure. This reduction in fatalities and injuries is further enhanced by accelerated fleet turnover; lower upfront vehicle prices encourage consumers to replace older, less secure vehicles with newer models featuring advanced safety technologies. In contrast, changes in vehicle mass play a minor and statistically offsetting role in the broader safety analysis. Although broad upward shifts in weight lead to small fatality reductions in the heaviest non-passenger automobiles, these gains are counterbalanced by slight increases in fatalities among the lightest passenger cars, leaving mass changes near the median weight distribution with a negligible net impact. Ultimately, as improved vehicle technologies and reduced exposure enhance occupant protection, many crashes that would have otherwise resulted in injury or fatalities are downgraded to property-damage-only incidents, which subsequently increases the cumulative costs associated with minor property damage. Table V-9 shows these results in more detail.

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