The Department of Transportation (DOT) has issued a regulation that reduces the corporate average fuel economy (CAFE) targets for 2031 passenger cars and light trucks to 34.9 mpg (6.7 L/100 km). This figure is a decrease from the previously anticipated “unadjusted” 50.4 mpg (4.6 L/100 km) that were set by the Biden administration.
The new requirements match the levels from 2022, prior to when regulations were made stricter, and the updated rules cover model years 2022 through 2031. The CAFE standard measures the average fuel usage across an automaker’s entire range of vehicles.
Modifications to Fuel Economy Rules
Trump’s administration initiated the process to roll back the standards in December 2025. The previous rules mandated an annual increase in fuel economy requirements of 2% for vehicles manufactured between 2027 and 2031.
The administration has named this effort “Freedom Means Affordable Cars,” and the rule is officially known as the Safer Affordable Fuel Efficient (SAFE) Vehicle Rule III. The DOT stated that this decision is expected to bring down the price of a new vehicle by US$1,300.
Influence on Manufacturers and Buyers
Furthermore, the administration will abolish the CAFE credit-trading program, starting with the 2028 model year. Under this system, automakers were penalized with fines if they failed to meet fuel-efficiency goals. Companies that exceeded their targets earned credits that they could trade with others who were struggling to meet them.
Companies whose fleets were mostly or completely zero-emission vehicles (ZEVs) earned significantly more credits. According to the DOT, this system “artificially propped up the EV industry at the expense of traditional automakers,” and removing it “ensures that manufacturers are spreading fuel-saving technologies throughout their fleets.”
Updates to Vehicle Classifications
The regulation will also alter how certain vehicles are classified. As per the DOT, automakers have “made design changes and added equipment to classify small crossover vehicles as light trucks and face less-stringent fuel economy requirements, despite not being intended to haul cargo or operate off-road.”
For model year 2030, the criteria will shift “to reflect each vehicle’s intended use accurately.” This adjustment will reverse the current ratio, which stands at about 70% light trucks and 30% passenger vehicles; to roughly 70% passenger cars and 30% light trucks.
The DOT noted that this shift could enhance the U.S. export market, as the current classifications “are not compatible with foreign market needs.” Despite allowing for a higher average fuel consumption than current regulations, the DOT claims that under this new standard, annual oil consumption in the U.S. is projected to drop by about 1.3 billion barrels by 2050 compared to 2024.
In reality, this change means consumers might have easier access to cheaper vehicle choices, which could drive sales of new cars equipped with more safety features. The DOT stated that this would save 1,900 lives and stop more than 300,000 serious injuries.
The target fuel economy of 34.9 mpg for model year 2031 represents an increase from the 30.1 mpg (7.8 L/100 km) achieved in model year 2024. The DOT’s decision is anticipated to significantly affect the automotive sector and consumers in the coming years.
Impact on Profitability and Market Competition for Automakers
The elimination of the CAFE credit-trading program will reduce financial incentives for automakers to prioritize zero-emission vehicles. Companies that relied heavily on selling electric vehicles may see a decline in profits, as a portion of Tesla’s earnings reportedly came from selling credits. The Department of Transportation stated that the program had created an uneven playing field, favoring manufacturers with large EV lineups over those producing traditional vehicles.
