Senate Weighs Effectively Killing Rule That Drove Rise of Fuel-Efficient Cars

Some carmakers have signaled they are preparing to step up production of gasoline-powered cars.

The Senate is weighing a major change to federal fuel-economy rules that would kneecap the policy that dramatically reduced gas consumption and helped create fuel-efficient cars like the Toyota Prius hybrid.

Republican senators are proposing a change to the Corporate Average Fuel Economy, or CAFE, rules as part of President Trump’s wide-ranging tax and spending bill. If enacted, the proposal would eliminate fines for violating CAFE, all but nullifying rules that for generations have pushed automakers to churn out ever cleaner and more fuel-efficient vehicles. That technology has saved two trillion gallons of gasoline over the past 50 years, according to the journal Energy Policy.

Automakers including General Motors and Jeep-parent Stellantis support the measure, while some of their rivals don’t. Consumer advocacy groups warn that the move could result in dated technology remaining on the road and further dependence on foreign oil sources.

“The combination of high penalties with the nearly impossible CAFE standards finalized during the previous administration is a major problem,” said John Bozzella, president and CEO of the Alliance for Automotive Innovation, which represents most major carmakers.

Trump came to office promising to cut regulations across the government, leading to the most significant unwinding of automotive clean-air and fuel-economy regulations in decades. Congress last month struck down the nation’s most aggressive emissions rules, and the Environmental Protection Agency has said it aims to loosen restrictions on automobile greenhouse-gas emissions.

Some carmakers have already signaled they are preparing to step up production of gas-powered cars. GM said last month it would invest $888 million to repurpose an electric vehicle plant to make V-8 engines. Stellantis also said it is bringing back the HEMI V-8 in the 2026 Ram 1500 pickup.

GM and Stellantis say they are continuing to develop fuel-efficient technology, including on their new V-8s, but that current CAFE rules are unrealistic.

An assembly line at the GM plant in Fort Wayne, Ind.

The measure would have to survive any challenges during the Senate parliamentarian’s review of whether it qualifies for inclusion in the bill, done under a process called budget reconciliation. That allows Senate Republicans to pass budget bills with a simple majority—rather than the 60 votes usually required—but only if provisions are primarily fiscal in nature. The provision also would need to be approved by the House.

The proposed changes are splitting the auto industry. GM and Stellantis said they support eliminating the fines altogether. Several major automakers, including Toyota and Hyundai, support revisiting the standards but are opposed to wholesale elimination of CAFE penalties, people familiar with the matter say. Ford declined to disclose its position.

In recent years, GM and Stellantis have faced the heftiest fines. Since 2022, GM has paid $128 million for CAFE violations, while Stellantis has paid more than $425 million. Ford has never been fined, according to federal data. Automakers can buy regulatory credits from competitors to offset fines.

Federal and state regulations have directly affected the look and feel of vehicles on U.S. roads—including through fuel-saving technologies such as turbocharged engines that deliver more power, transmissions with more gears and powertrains that automatically shut off at stoplights to conserve gasoline.

Jeep parent Stellantis says it supports the complete elimination of CAFE fines.

Under the existing rules, automakers are hit with fines when the average miles per gallon for their entire fleet falls short of the CAFE standard. For model year 2026, that threshold is 49 mpg.

Industry groups and other manufacturers argue that the standards, most recently increased under the Biden administration to 50.4 mpg by model year 2031, have become exceedingly stringent with punishing fines.

But electric-car makers and some foreign rivals believe the proposed change could effectively render CAFE meaningless, according to people familiar with the matter.

“Automakers have proven time and time again that without strong and enforceable fuel-economy standards, many of them will leave proven, popular, and cost-effective technologies like hybrids sitting and gathering dust on the shelf,” said Chris Harto, a Consumer Reports policy analyst.

The debate over fuel economy goes back to the 1970s energy crisis that led to gasoline shortages. At that time, some parts of the country had to resort to rationing fuel, allowing cars with license plates with an even-numbered last digit to refill on even-numbered dates, and odd-numbered last digits on odd dates.

Gasoline shortages during the 1970s energy crisis led to long lines and, in some places, rationing of fuel.

In response, Congress started writing the law that would create the CAFE rules.

Detroit’s automakers objected, warning that the federal requirements would result in Americans driving tiny cars and pleading with lawmakers to let consumer choice dictate what vehicles they made.

“This would place definite hardships on the many Americans who want and need larger cars to meet their personal requirements,” Ford Motor said at the time.

President Gerald Ford signed legislation creating CAFE standards in 1975.

Bob Lutz, who had senior roles at GM, Ford and Chrysler over a nearly 50-year career, said the inception of fuel-economy rules placed U.S. automakers at a disadvantage to Asian-based rivals that, at the time, were already making smaller cars. It took the domestic industry decades to recover, he said.

“We might have gone off the big V-8 beasts ourselves,” he said. “Market forces could have taken us in the same direction but with less turmoil.”

The proposal to eliminate CAFE fines was included in the budget reconciliation language released earlier this month by the Senate Commerce Committee, which Republican Sen. Ted Cruz chairs.

If passed, the proposal would result in modest savings for car buyers, according to the Senate Commerce Committee.