The DOE Finalizes New Mileage Rules To Boost EV Sales

The DOE updated its methodology to represent the real-world EV economy more accurately.

from left: 2024 Tesla Model 3 (aka Highland) and Tesla Model Y

Suvrat Kothari

By: Suvrat Kothari

Mar 19, 2024 at 2:03pm ET

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The U.S. Department of Energy (DOE) has finalized new rules to estimate the mileage of electric vehicles. The ruling better represents the real-world efficiency of EVs and is expected to help the industry pivot toward an electrified future by facilitating carmakers to sell more EVs.

The proposal required gas-equivalent EV mileage ratings to be slashed by 72% by 2027. That means the petroleum equivalency factor (PEF) was set at 23.2 kilowatt hours per gallon by 2030—something OEMs said was harsh. But the new rules soften that target, and automakers can now gradually phase in their mileage requirements through 2030.

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EV Regulation Undergoes A Major Overhaul.

Mileage and emissions rules finalized this week would shape how the EV industry grows through the decade and beyond. The rules are designed to give carmakers more time to adopt EVs, while minimizing penalties, but sharply increasing EV penetration from 2030.

Under the new rules, the PEF is set at 82 kWh/gallon for 2024-2026, and it would gradually reduce to 29 kWh/gallon by 2030 and beyond. This allows U.S. carmakers to build more gas-powered cars through 2030, but still meet the Corporate Average Fuel Economy (CAFE) requirements, Reuters reported.

Environment groups argued that the previous rules allowed carmakers to offset the fuel consumption of gas cars by selling just a small percentage of EVs.

“The automakers’ free ride is over,” said Pete Huffman, senior attorney at the Natural Resources Defense Council. “The old calculation included a multiplier of nearly seven that significantly inflated the calculated fuel economy of EVs. DOE’s final rule phases out the multiplier while updating other data used in the calculation with more current figures.”

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Automakers were caught off guard by the initial proposal that an auto industry group said would have resulted in $10.5 billion in penalties for not complying with the proposed fuel economy standards. The final order diminishes the gas-equivalent fuel economy rating for EVs by 65% (instead of 72%) through 2030.

The news comes after Sierra Club and the Natural Resources Defense Council petitioned the DOE last year to update how EV fuel economy is calculated, instead of relying on what is a two-decade-old methodology.

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In simple terms, the DOE determines equivalent fuel economy values for EVs using urban and highway energy consumption values from EPA test cycles. It then converts combined energy consumption to MPGe. The updated rules would determine the EV economy by factoring in energy consumption, grid efficiency, and long-term energy projections.

The non-profit said that by overstating the MPGe figures of EVs, the previous method of calculation allowed automakers to sell far more gas cars. Sierra Club also said that these mileage requirements are “wholly separate” from the EPA’s final emissions standards due on Wednesday.

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