How lower fuel economy targets could boost pickups and V-8 engines

Key points

• The U.S. lowered fuel economy targets to 34.9 mpg by 2031, down from 50.4 mpg.
• Congress eliminated fines for noncompliance, saving automakers hundreds of millions.
• Automakers are reintroducing V-8 engines and selling more pickups and SUVs.

The U.S. government has sharply lowered fuel economy standards for light-duty vehicles and stopped issuing fines for violations, a move that could deliver billions of dollars in financial benefits to automakers. The National Highway Traffic Safety Administration in late September set an average target of 34.9 miles per gallon by 2031, down from the 50.4 mpg target finalized under the Biden administration in 2024.

Congress also voted last year to eliminate fines for noncompliance. Previously, General Motors and Stellantis paid hundreds of millions in civil penalties for missing fuel economy requirements in earlier model years, according to Reuters.

Financial impact and analyst views

Itay Michaeli, an analyst at TD Cowen, said cost reductions from fines and credits are already providing earnings benefits. "We've already seen [costs from fines and credits] come down even this year and serve as incremental earnings tail winds," he said, adding that savings could reach a few to several hundred million dollars.

The new rules also end the selling and trading of credits that automakers used to offset production of fuel-thirsty vehicles. NHTSA had allowed automakers at risk of exceeding their average to buy credits from makers of low- or zero-emission vehicles. State and federal credits have historically been revenue sources for electric vehicle producers like Tesla and Rivian.

We've already seen [costs from fines and credits] come down even this year and serve as incremental earnings tail winds

— Itay Michaeli

Strategy shifts and market trends

Michaeli outlined three potential strategy changes. First, automakers can sell more internal-combustion vehicles and fewer compliance cars, which are slower-selling or less profitable fuel-efficient vehicles or EVs made to meet regulations. In the past year, several automakers have written down billions in EV investments. Ford announced a $19.5 billion special charge in December, GM recorded a $7.1 billion impact in the fourth quarter, Porsche saw a 98% drop in automotive operating profit in 2025 due to EV write-downs, and Honda reported its first annual loss in about 70 years partly because of EV costs.

Second, looser rules allow automakers to sell more high-margin vehicles with larger engines. Detroit automakers and some foreign ones have reintroduced V-8 engines. Stellantis' Ram brought back V-8s for its full-size pickups. GM said in September it will bring a new generation of small-block V-8s to its Silverado and Sierra trucks. Ford has increased V-8 availability across its F-150 pickups, the top-selling U.S. vehicle. Third, automakers are redirecting research and development from fuel-efficiency projects toward more profitable ones or powertrain development.

John Murphy, an automotive analyst, said balance sheets may need to be far higher due to extreme uncertainty about powertrains. "Remember, powertrain is the most expensive part of a vehicle," he said. Despite regulatory changes, hybrids have surged in the U.S. Murphy forecasts hybrids will grow from 14% of the market last year to about 34% by the end of the decade. Michaeli argued EVs will still grow, citing high loyalty rates and the large number of two-car households in the U.S. He noted there are roughly 300 million vehicles on U.S. roads, with only about 7.5 million EVs, according to the Alliance for Automotive Innovation. "A lot of next-generation EVs are still coming," he said.