President Donald Trump on Wednesday said his administration would “reset” fuel efficiency standards for passenger cars in an effort to put a lid on rising auto prices, as the administration battles inflation and an affordability crisis.
The previous rules, which sought to lower carbon emissions, “put tremendous upward pressure on car prices,” Trump said in the Oval Office.
The president is under political pressure to address affordability concerns after Democrats swept major races last month, fueled by voters’ frustration with rising prices.
Overall inflation, as measured by the consumer price index, has risen every month since Trump announced sweeping tariffs on imported goods, including automobiles and car parts, among other items. Food prices have also been rising this year. In early November, the White House announced cuts to dozens of tariffs in a move aimed at cutting food prices.
The average new vehicle price in October surged to an all-time high, above $50,000 for the first time ever, according to Kelley Blue Book. However, KBB said that “despite higher prices, retail sales continue to maintain a healthy pace.”
“The $20,000-vehicle is now mostly extinct, and many price-conscious buyers are sidelined or cruising in the used-vehicle market,” Cox Automotive analyst Erin Keating said in October.
The Department of Transportation says the proposal will “save the American people $109 billion” or $1,000 on the average cost of a new vehicle, but it’s unclear how fast prices could fall. The updated standards still must go through a formal rulemaking process before being finalized, likely in 2026.
The proposed change “will also revive the beating heart of American manufacturing and unshackle the nation’s automotive industry,” the department and the National Highway Traffic Safety Administration said.
It would also roll back efficiency mandates raised by the Biden administration.
“The announcement today is a shift in long-term fuel economy targets for model year 2031 vehicles,” said Mark Schirmer, Cox Automotive’s director of industry insights communications.
“Those targets are being lowered, which may change automaker long-term strategy and product development plans and pricing, but will have little impact on prices near term,” he said.
The administration also said it would reclassify crossover vehicles and small SUVs as passenger automobiles instead of light trucks, removing what it called a “market distortion that existed for decades.”
Trump was joined at the White House for the announcement by executives from Detroit’s “Big Three” — Stellantis CEO Antonio Filosa, Ford Motor Company CEO Jim Farley and John Urbanic, executive plant director of General Motors’ Orion assembly factory in Michigan.
Stellantis is the European parent company of the Chrysler, Dodge, Jeep and Ram car brands.
In statements, all three of the companies praised the move. Stellantis said it would “re-align … standards with real world market conditions,” while Ford said “we can make real progress on carbon emissions and energy efficiency while still giving customers choice and affordability.”
“This is a win for customers and common sense,” Ford’s Farley added.
General Motors said it has “long advocated for one national standard that upholds customer choice and provides the auto industry long-term stability.”
The Chevy and Cadillac maker added that it remains “committed to offering the best and broadest portfolio of electric and gas-powered vehicles on the market.”
Shares of Ford and GM stock closed about 1% higher Wednesday. Stellantis’ stock jumped 4.7%.