The National Highway Traffic Safety Administration (NHTSA) has finalized the SAFE Vehicles Rule III, published September 30, 2026, which substantially lowers Corporate Average Fuel Economy (CAFE) standards for model years (MY) 2022 through 2031. NHTSA projects that the rule lowers the MY 2031 fleetwide target from 49.3 mpg to 34.9 mpg and cuts average up-front vehicle cost by about $1,290.

Effective Date

The rule is final and takes effect November 30, 2026. Parties who wish to challenge the rule must petition a federal court of appeals within 59 days after NHTSA issues it, a deadline that falls in late November 2026.

Principal Changes

The rule changes the CAFE program in five ways. First, relying on federal law that bars it from considering electric vehicles when setting the standards, NHTSA now sets the standards based only on gasoline, diesel, and conventional hybrid vehicles. Prior rules counted EVs, which pushed targets beyond what gasoline vehicles could reach. Second, fuel economy targets now tighten only 0.90 percent a year for passenger cars and 0.51 percent a year for light trucks through MY 2029, compared with 2 percent a year under the 2024 rule, and the revised standards apply retroactively to MY 2022.

Third, beginning in MY 2030, NHTSA’s revised vehicle classification rules drop three-row seating as a light-truck criterion and tighten the off-highway test. Many crossovers, SUVs, and minivans will move to the passenger car fleet, and both fleets’ standards drop in MY 2030 to reflect the shift. Fourth, manufacturers can no longer sell credits earned in MY 2028 or later, although credits earned through MY 2027 remain tradable for five model years. Finally, the standards carry no fines: Congress cut the CAFE civil penalty to $0 in the One Big Beautiful Bill Act in July 2025. The standards still determine compliance status and credits, but missing them costs nothing.

Benefits to Dealers and Consumers

Because manufacturers can now meet the standards without EVs, they have little reason to push EV allocations on dealers. Dealers can stock what their customers buy, turn inventory faster, and reduce floorplan expense. NADA estimates the rule makes new vehicles affordable for 2.6 million more households.

Risks

Opponents will likely argue the rule falls below the “maximum feasible” level that federal law requires, and a future administration or Congress can tighten standards or restore penalties.