By David Shepardson

WASHINGTON (Reuters), – The U.S. National Highway Traffic Safety Administration has reinstated a significant increase in the penalties for automakers whose cars do not comply with fuel efficiency regulations for model year 2019 and beyond.

This decision was good news for Tesla (NASDAQ) and could have repercussions on other automakers in the hundreds of millions or even billions of dollars.

Confirming an earlier report by Reuters, NHTSA said https://www.nhtsa.gov/sites/nhtsa.gov/files/2022-03/2022-03-25%20CAFE%20Penalties%20FR%20-%20Website%20Version_0.pdf the decision “increases the accountability of manufacturers for violating the nation’s fuel economy standards” and the penalty increase “incentivizes manufacturers to make fuel economy improvements.”

The administration of President Donald Trump delayed, in January 2021’s final days, a 2016 regulation. This more than doubled penalty for automakers that fail to meet the Corporate Average Fuel Economy (CAFE), requirements beginning in 2019.

The final NHTSA rule takes effect sixty days after publication. It reinstates the earlier penalties and increases them for the model year 2022. Despite the fact that the matter was being reviewed, the agency did not collect penalties for the 2019-2021 model year. This is currently the subject of legal challenges.

Steven Cliff (NHTSA’s top executive) signed the final rule Thursday before its official publication.

For 2019 to 2021, the penalty is $14. The fine was previously $5.50. The fine rises up to $15 for 2022.

In 2016, automakers protested against the increase in penalties, warning that it would lead to an industry cost hike of at least $1Billion annually. For example, Chrysler parent Stellantis estimates that the penalty hike will cost Chrysler as high as $572 million. Tesla however expects to increase its value for compliance credits.

Automobile manufacturers that achieve greater fuel efficiency than is required may sell credit to other automakers.

After a court order, President Barack Obama had the increased penalties start at the 2019 model years. However, Trump set the effective date for the 2022 year model year.

NHTSA estimates that automakers will owe $294 Million at the new rate for 2019, up from $115.4M under the previous rate.

NHTSA included automakers with plans for 2019-2021. They did this “thinking that penalties wouldn’t rise” and at their own risks.

A trade group that represents nearly every major automaker except Tesla stated Sunday that it would have been a better outcome if penalties were invested in electric cars, batteries, and charging infrastructure rather than being deposited into the Treasury general fund.

NHTSA suggested that CAFE requirements be increased by 8.8% per annum for 2024-2026. This reverses a Trump-era regulation which had lowered higher standards starting in 2021. NHTSA expects to release its final CAFE rules by 2026.

Stellantis stated that it was willing to “work with Congress and the administration to permit the agencies to utilize the proceeds of penalties to boost investments in technologies and infrastructure necessary to speed up a strong U.S. market.

Tesla has not yet responded to my request for comment.

Congress directed federal agencies in 2015 to adjust civil penalties for inflation. U.S. Fuel economy fines have lost 75% of the original value. They had risen once between 1975 and 1997, when they were $5.50 and $5.50 respectively.