Cancellation of “Fuel Multiplier” Changes the Game for Electric Vehicles
The automotive industry is once again facing significant regulatory changes. The U.S. Department of Energy has officially canceled the so-called “Fuel Content Factor” (FCF) – a formula that made electric vehicle production more attractive to automakers. This decision will force companies to reconsider their market strategies.
This formula helped automakers comply with Corporate Average Fuel Economy (CAFE) standards. Although the Trump administration canceled penalties for non-compliance with these targets, the standards themselves remain an important benchmark for the industry.
Efficiency of Electric Vehicles in Regulatory Calculations Sharply Declined
The fuel multiplier stimulated electric car production, significantly easing compliance with regulations. Its cancellation reduces the regulatory “value” of electric vehicles for meeting CAFE requirements by approximately 70%. This shows how much this formula inflated their impact in official calculations.
The Biden administration proposed eliminating it even before the term ended, but now it has officially become a fact.
Excluding the FCF from the overall Petroleum Equivalency Factor (PEF) calculation will result in electric vehicles appearing much less efficient than before. According to Reuters, the Department of Energy deemed this multiplier illegal.
Legal Basis for Cancellation
This decision followed a ruling by the U.S. Court of Appeals for the Eighth Circuit in September 2025. Judge Duane Benton noted that the multiplier was illegal from the very beginning, which undermined the legal basis for its gradual phase-out.
Without the inflated regulatory value from the fuel multiplier, electric vehicles lose some of their weight in automakers’ model lineup planning. This could ease pressure to overproduce electric cars in markets where demand has fallen and allow companies to focus more on profitable ICE-powered SUVs and crossovers.
Long-Term Consequences for the Industry
Why is this important if CAFE penalties are canceled? Because the standards themselves have not disappeared. For now, only the penalties and targets have changed. CAFE rules remain in effect, and the petroleum equivalency calculation still determines how electric vehicles are accounted for for compliance. Only the level of pressure has changed.
By canceling penalties and lowering fleet-wide targets, regulators have given manufacturers room to maneuver. The National Highway Traffic Safety Administration has also proposed lowering the average fuel economy requirement for the entire fleet by 2031 to 34.5 miles per gallon, compared to 50.4 mpg set in 2024, easing pressure in the near term.
However, developing new models takes years, while regulatory changes can happen quickly. If stricter standards are reinstated in the future under a different administration, how companies respond to today’s changes could affect them for decades to come.
These regulatory shifts are occurring against the backdrop of a challenging market environment for electric vehicles. Many automakers are already revising their investment plans and electrification transition timelines, facing demand fluctuations and profitability issues. The cancellation of the “fuel multiplier” could become an additional argument in favor of a more cautious and gradual approach to electrification, especially in markets like the US, where traditional SUVs remain the business foundation. Such decisions underscore how political and legal factors can influence long-term technological trends in the automotive industry.