WASHINGTON, June 7 (Reuters) - President Joe Biden's

administration on Friday finalized tighter fuel economy rules

for trucks and sport utility vehicles through 2031 that are not

as stringent as it first proposed, a federal agency said.

The National Highway Traffic Safety Administration (NHTSA)

said the proposed new rules will result in much lower compliance

penalties than originally proposed, a significant win for

Detroit automakers.

Automakers praised the changes and environmental groups

criticized them.

In July 2023, NHTSA had proposed boosting Corporate Average

Fuel Economy (CAFE) requirements by 2% per year for passenger

cars and 4% per year for light trucks from 2027 through 2032.

Under the final rule, NHTSA will not require any increase

for light trucks for 2027 and 2028 and will only require 2%

increases from 2029 through 2031.

Last year, NHTSA said its proposal to hike fuel economy

standards through 2032 would cost the industry $14 billion in

projected fines. This includes $10.5 billion for the Detroit

Three: $6.5 billion for General Motors,$3 billion for

Chrysler-parent Stellantis ( STLA ) and $1 billion for Ford

Motor ( F ).

Under the final rule, the auto industry is collectively

expected to face a total of up to $1.83 billion in fines through

2031 -- and it could be as little as nothing -- based on various

models, government NHTSA told Reuters.

Automakers buy credits or pay fines if they cannot meet CAFE

requirements. In June 2023, Reuters first reported Stellantis ( STLA )

and GM paid a total of $363 million in CAFE fines for failing to

meet U.S. fuel economy requirements for prior model years.

NHTSA said the rule will hike fuel economy to about 50.4

miles per gallon by 2031 from 29.1 mpg currently. Last year, the

agency projected the rule would hike requirements to 58 mpg by

2032.

The is the third regulatory action the Biden administration

has taken in recent months that did not tighten vehicle

regulatory proposals as much as promised. Earlier actions

included new compliance calculations for EVs that were less

strict than originally proposed, and tailpipe rules that would

ultimately require automakers to make fewer EVs than they had

originally forecast.

John Bozzella, who heads the Alliance for Automotive

Innovation trade group representing major automakers, praised

the revisions that will dramatically reduce projected penalties

that his members had feared.

"Those fines wouldn't have produced any environmental

benefits or additional fuel economy and would've foolishly

diverted automaker capital away from the massive investments

required by the electric vehicle transition," Bozzella said.

Dan Becker, director of the Center for Biological

Diversity's Safe Climate Transport Campaign, said NHTSA had

"caved to automaker pressure" and said the agency's "weak final

rule wastes too much gas, spews too much pollution and cedes the

clean vehicle market to foreign automakers."