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The US Trump administration has agreed to an auto industry request to delay the start of much higher penalties for automakers which fail to meet fuel efficiency requirements, a move that could save the industry hundreds of millions of dollars or more, a media report said.

Reuters said the decision – announced eight days before president-elect Joe Biden takes office – followed a US appeals court ruling last August which overturned the Trump administration 2019 decision to suspend a regulation that more than doubled penalties for automakers failing to meet fuel efficiency requirements.

The news agency noted Congress in 2015 had ordered federal agencies to adjust civil penalties to account for inflation. In response, the National Highway Traffic Safety Administration (NHTSA) issued rules to raise fines to US$14 from $5.50 for every 0.1 mile per gallon new cars and trucks consumed in excess of required standards.

Automakers protested that 2016 hike, saying it could increase industry compliance costs by $1bn annually, Reuters said.

The report said the auto industry trade group which sought relief praised the NHTSA decision, noting vehicles that would have faced higher penalties “have already been sold or will soon be manufactured”.

According to Reuters, Fiat Chrysler Automobiles (FCA) paid a $79m civil penalty for failing to meet 2017 fuel economy requirements after paying $77.3m for 2016 requirements.

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By GlobalData

Last November, the report added, FCA warned it could need to set aside EUR500m ($608m) as a result of the appeals court decision.

The NHTSA reportedly cited FCA’s disclosure and noted “increasing the rate is likely to lead to an increase in the price of credits”. The agency added “to disregard the industry’s serious reliance interests would be unfair and improper”.

Meanwhile, Reuters added, environmental groups urged the administration to retain the increase, noting US fuel economy fines lost nearly 75% of their original value because fines had been increased only once – from $5 to $5.50 in 1997 – since 1975.

Dave Cooke, vehicles analyst at the Union of Concerned Scientists, told Reuters NHTSA’s decision amounted to regulators “doing some last-minute favours” for the auto industry.