WASHINGTON, Sept 30 — The Biden administration proposal to hike fuel economy standards through 2032 is not feasible and could cost automakers a total of more than US$14 billion (RM65.8 billion) in fines, an automotive group said yesterday.

The Alliance for Automotive Innovation, which represents General Motors, Toyota Motor, Volkswagen, Hyundai and others, said the National Highway Traffic Safety Administration Corporate Average Fuel Economy proposal "exceeds maximum feasibility” and that the agency projects "manufacturers will pay over US$14 billion in non-compliance penalties between 2027 and 2032”.

The fines would impact one in every two light trucks and one in every three passenger cars in 2027-2032, the group added.

A separate document viewed by Reuters said the Detroit Three — GM, Ford Motor and Chrysler-parent Stellantis — would face about US$10 billion in CAFE fines in that period.

Across the world, efforts to reduce vehicle emissions and shift to electric vehicles are meeting resistance for reasons of cost. European Union ministers on Monday agreed to dilute a proposal on new vehicle emissions.

A NHTSA spokesperson said the estimate cited by automakers represents the agency forecast and is "consistent with our statutory obligations”.

The spokesperson also noted automakers "are free to use electric vehicles to comply and avoid penalties altogether”.

In June, Reuters reported Stellantis and GM paid a total of US$363 million in CAFE fines for failing to meet US fuel economy requirements for prior model years.

The record-setting penalties include US$235.5 million for Stellantis for the 2018 and 2019 model years and US$128.2 million for GM covering 2016 and 2017.

"The number of non-compliant vehicles and manufacturers projected exceeds reason and simply put, will increase costs to the American consumer with absolutely no environmental or fuel savings benefits,” the auto group said.

It added the "projected US$3,000 average price increase over today’s vehicles is likely to decrease sales and increase the average age of vehicles on our roads.

The criticism is similar but not identical to concerns raised about the Environmental Protection Agency’s proposal that would require 67 per cent of new vehicles to be electric by 2032. The auto group in June called the EPA proposal "neither reasonable nor achievable.” Toyota called the EPA proposal stringency requirements "extreme and outside historical norms.”

The government shutdown, which will leave hundreds of thousands of federal workers furloughed and cut access to food and nutrition assistance programmes for millions of people among the wide range of disrupted services, is seen hurting spending.

"There is no sign of a major pullback in consumer spending that would signal an impending recession in these numbers, but definitely growing signs of stress as consumers increasingly struggle under the weight of rising energy prices and borrowing costs and moderating income growth,” said Scott Anderson, chief US economist at BMO Capital Markets in San Francisco.

Growth prospects for this quarter were boosted by other data from the Commerce Department on Friday showing the goods trade deficit narrowed 7.3 per cent to US$84.3 billion in August, with exports rising and imports declining. Retailers also increased inventories. Estimates of gross domestic product growth for the third quarter are as high as a 4.9 per cent annualized rate. The economy grew at a 2.1 per cent pace in the second quarter. — Reuters