The Merge | Alliance for Automotive Innovation

AS PREPARED FOR DELIVERY

Thank you, John. Thanks to the Alliance for having me here today. It’s an honor to speak at the Merge Conference and to see so many familiar faces. We’re very glad to be out of the government shutdown and I’m pleased that this is my first speech outside of DOT since funding was restored.

At NHTSA, our mission of improving road user safety drives everything we do, and our data-driven process determines our policies. And we know we have a lot of work to do. While roadway fatalities have been dropping recently, the level is still unacceptably high, just under 40,000 last year. And we know that so many of these deaths are entirely preventable, by wearing seatbelts, reducing speed, driving sober, and putting down our phones.  

At NHTSA, we’re doubling down on countermeasures to combat such risky behavioral issues—including reinvigorating our relationship with law enforcement, who put their lives on the line to keep our roads safe to increase enforcement of traffic laws. We think we’re seeing results from that with a significant drop in fatalities since the first of the year. And I’ll talk a bit more about activities in this space a bit later. But it’s also critically important that the vehicles Americans drive and ride in each day continue to get safer. We know that newer cars are safer cars and that a good number of these fatalities could have been prevented if the occupants were in newer vehicles. So, we have a 100% mutual interest with you in improving safety and turning over the fleet more quickly. But as the average age of a vehicle in the US fleet is creeping up to 13 model years old, we’re seeing just the opposite.  

One of our goals at the USDOT is to increase overall fleet safety by increasing the number of newer vehicles in the fleet, and that starts with affordability. This is one of the President’s top priorities, and Secretary Duffy has made it clear since his confirmation hearing when he spoke at length about it. I remember reading an article that evaluated the ability of the median household to afford the average price of the new vehicle.  Using traditional affordability metrics—10% downpayment, 10-15% of a consumer’s take-home pay over a 48-month term, the article concluded that a new vehicle was affordable in only one metropolitan area: Washington, DC.  That article was from mid-2016, when the average price of a new vehicle was $36,000. In September, Kelley Blue Book reported the average transaction price of a new vehicle in the U.S. eclipsed $50,000. This is up from about $40,000 at the end of President Trump’s first term—a 25% percent increase. So what does affordability look like with a $50k car? Let’s add the average national sales tax and put 10% down, we’re financing around $48,500 at the average new car financing rate on a four-year contract, that’s right around $1,170 a month—which is affordable for folks with $140k in annual take home pay. With 2024’s median personal income (not take-home pay) at about $45k, and median household income (which generally involve multiple vehicles) at under $84k, you’re dealing with a substantially smaller pool of consumers who can fit that into their budget—again, using traditional affordability metrics. It’s no wonder then, that as prices have jumped in recent years, folks are turning a blind eye to traditional affordability metrics.  Financing has stretched to an average of 72 months, which would reduce that payment to $840 per month at the same interest rate. While unaffordable to the vast majority of Americans, more can stretch to fit that into their monthly budget. With shorter terms, vehicle owners had positive equity in their vehicle within two or three years, and could trade it in for a new vehicle while it was still under warranty—increasing the vehicle’s value. But with stretched finance terms due to higher prices, it’s taking more years to achieve positive trade equity, often well past the warranty’s expiration. That means thousands of dollars in more interest paid ($4,000 in my example). And if you want to buy a new vehicle while under water, or have to buy another because you’ve been in a total loss crash, you’ve got to finance that amount on to the next contract—either further increasing your debt burden, or pushing people into used cars. The result is that, while everybody wants to buy a new vehicle, fewer and fewer can afford to do so. And while it’s true that today’s vehicles are more durable than those of past generations, a 13-year-old vehicle today is a lot less safe than a new one.  

One outcome is that average auto finance costs have increased by 57% over the last 15 years, while delinquencies have risen 50% over the same period. We’re now seeing a record high for subprime borrowers at 6.65% more than 60 days delinquent, and while you don’t see many subprime new car contracts, we’re also seeing above average borrowers twice as likely to default from pre-pandemic times.

This is a canary in the coalmine that should concern us all. Our vehicles are what enables us to live our lives and we depend on them to get from point A to point B, including our jobs, every day. Even if other payments are being delayed, people will usually keep up with the car payments until the last possible moment—it’s our lifeline. So, it says something that increasing numbers are unable to keep up with their payments and face repossession—which makes getting another vehicle that much more difficult.

When you look at the total picture, it adds up to a real affordability problem, and this is an administration that wants to do something about it. The One, Big, Beautiful Bill, included a provision to allow consumers to deduct up to $10,000 annually in interest paid on loans for new vehicles built in America—even for families that don’t itemize their deductions—that should help.

We know there are many reasons that prices are so high, one of which is regulatory burden. At NHTSA we are also very much focused on ensuring that our regulatory requirements adequately account for cost to consumers. And we know, for instance, that evaluating the technology cost differential between a battery electric and internal combustion version of the same vehicles doesn’t come close to measuring the massive financial disruption of developing and supporting multiple powertrains. As the auto industry’s regulator, we know that we have an essential role to play in creating a durable and sensible regulatory environment that ensures safety without unduly hindering innovation or driving prices ever higher. We truly believe that we can achieve our mission of improving vehicle safety in a way that also allows for regulatory costs to be reduced.  

One of our current areas of intense rulemaking activity involves resetting the fuel economy standards for passenger vehicles and light duty trucks. Both as a matter of law and policy, the fuel economy standards administered by NHTSA should NOT be used to force the electrification of the U.S. vehicle fleet. That certainly isn’t what Congress intended when it gave us standard-setting authority in the 1970s. And by an enormous margin, Americans do not want to be forced into choosing one powertrain over another.

So our rulemaking, which I’ll look forward to discussing in the future—not today, seeks to return the CAFE program to its roots of providing for fuel economy standards that meet energy conservation needs in a way that balances technological and economic factors, and can be achieved through traditional gasoline and diesel technologies—remember, we’re prohibited by statute from even considering the availability of alternative fuel technologies such as electric propulsion systems.

This Administration is committed to enabling American car buyers, not the federal government, to decide what proportion of the vehicle fleet will be electrified. To be clear: We have nothing against EVs and want EV manufacturers to compete for buyers’ purchase dollars on an even playing field. Our priority is enabling you to build the best vehicles the world has ever seen—regardless of powertrain, and to enable buyers to purchase more affordable and safer vehicles that they want, not that the government is telling them they must buy. Our proposal would have substantial cost savings for the total economy as well as for consumers.

Now it’s not just fuel economy standards that increase regulatory costs, but other vehicle-related rulemakings as well. We feel that the best way to regulate the industry is through smart regulation—that is, establishing performance targets that enhance vehicle safety without locking in particular technological pathways to achieving those targets. Indeed, that is how the Vehicle Safety Act is designed to function—requiring NHTSA to establish standards for motor vehicle performance that meet the need for motor vehicle safety, are objective, practicable, and supported by specific, replicable, test procedures. That said, many Federal Motor Vehicle Safety Standards drafted with the intent of being technology neutral were created with a background understanding of the technologies that existed at the time they were promulgated. Decades later, these standards can become riddled with requirements that create unintended and unnecessary barriers to new technologies or designs—often entirely unrelated to the underlying safety goals of the standards.

I call such requirements vestigial regulations—similar to vestigial organs we learned about in anatomy classes, such as the appendix or wisdom teeth, that no longer serve any real functions, but can create real harm. And these vestigial regulations have a tendency to ossify, and affect industry in unforeseen ways. They can have a cascading effect over time.  They become baked into the underlying notion of what it means to design a vehicle -- another box to check. And every time that box is checked, we’ve lost another opportunity to innovate or design new ways to meet and exceed safety requirements more efficiently and effectively if a manufacturer so chooses.

A good example is FMVSS No. 108 for vehicle lighting, which establishes performance requirements that must be met when applying 12.8 volts direct current to the terminals. While this was no doubt drafted to provide appropriate testing specificity, it has the effect of boxing out alternative, then-unforeseen, technologies—and limiting design creativity. If a manufacturer were to consider implementing a 48-volt architecture, for instance, they’d need to install a DC/DC step down converter, taking up space, and adding mass, cost, complexity, risk of failure, with no corresponding benefits. You don’t improve safety by regulating the thickness of a wiring harness. While these aren’t the hurdles we hear about when we talk to industry, we need to hear from you.

Now, we know NHTSA’s rulemaking process is laborious – from research to drafting and proposing a regulation, to receiving comment and potentially changing the rule – the process takes on average, seven years. This process can be much simpler and faster, however, if we’re eliminating non-controversial vestigial regulations with no safety benefit, and can demonstrate that fact.

So, we’re working on this project now. We’re in the process of getting our engineers talking to your engineers about areas of FMVSS that add unnecessary cost and complexity but do nothing to improve actual safety.  And we’re especially interested in identifying those aspects of a regulation that impede your ability to enhance safety. We’ve already proposed trimming unnecessary text from 16 rules as part of the DOT’s first “Deregulatory Sprint” in May. Most of those changes were minor but we’re looking to build on the progress with future, more substantive, actions. And we’re glad to see that our friends in the U.S. Senate have decided to convene a hearing in January on this very topic in January. It should be a lively discussion.

Another area that presents unnecessary and unintended barriers to innovation relates to requirements that were designed with a human operator in mind—thus requiring all vehicles to have human controls that are no longer necessary in automated vehicles. One example is FMVSS No. 135’s requirements that vehicle service brakes be operated by means of a foot control. Of course, when this standard was written this pedal control requirement was meant to address human factors concerns, with no thought of automated driving systems.

Earlier this year, NHTSA initiated the development of Secretary Duffy’s Automated Vehicle Framework to help streamline reporting requirements and the exemption process for purpose-built vehicles. As part of that Framework, we’re looking at ways to rewrite the FMVSS to remove outdated requirements to help remove barriers to development of alternative designs enabled by automated driving systems. We’ve already announced in our Spring Rulemaking Agenda several proposals to standards related to windshield wipers and washers, gearshifters, and lighting devices to accommodate AVs, and there’s more to follow. Our team is hard at work on proposals and we expect to make some news on this when the Fall Regulatory Agenda publishes.

Before I leave you, I did want to flag another major initiative we’re pursuing to save lives on our roadways. Because, let’s face it, most of the annual deaths on our roads are not from defective vehicles or equipment; they’re from the prosaic, run-of-the-mill bad behaviors of far too many drivers on our roads. And the crash numbers are so shockingly high in our country that if we can’t convince people to drive more responsibly, we’ll never achieve our safety goals. New vehicle technologies take decades to work their way into the fleet, and we’re focused on getting our fatality numbers down now. So, we’re working hard to enhance our behavioral safety programs to convince drivers to do the right thing on their own, with technologies that don’t require broad mandates, and with “encouragement” from our legal system.

NHTSA has been developing a significant Behavioral Safety Plan to do just this. The first pillar of this plan is active re-engagement with law enforcement across all areas. We’re sending a clear message that we support the men and women of law enforcement, and we fully endorse their getting back to vigorous traffic enforcement. We know that previous leaders pulled back their support for law enforcement, and we are making crystal clear that we reject that approach. As part of this pillar, we’re also supporting greater use of our high-visibility enforcement campaigns, in partnership with local agencies, because enforcement coupled with education—think Drive Sober, Get Pulled Over—works. We’re also increasing training for state and local prosecutors and judges, and expanding public recognition of heroic traffic enforcement officers. For the second pillar, we’re stepping up the fight against impaired driving with new training to support more prosecutions, technology to reduce recidivism, and increased use of oral fluid devices to test for the presence of marijuana. We’re pushing to increase seatbelt use by funding increased nighttime belt enforcement, promoting child booster seats, and supporting tougher state laws. A fourth area of focus is reducing excessive speed by promoting wider use of data to target areas of speeding for enforcement and supporting tougher speeding laws. We’re also engaged in an exciting effort to increase post-crash survival rates through expanded access to prehospital blood transfusion programs. We’ve boosted funding for this and are partnering with the Department of War to get the program into wider use. We’re leveraging new technology to help State Highway Safety Offices better identify and target local problem driving areas. And, last, we’re expanding the reach of our public education messages through a National Partnership Network, targeting other agencies and organizations with similar safety missions.

If we can make a dent in people’s attitudes and behaviors, we can drive down highway fatalities.

So, as you can see, we’re active across many fronts at NHTSA in improving road user safety. For your takeaways, recognize that we know that newer cars are safer cars. We want to free up automakers to innovate to build the safest, most efficient vehicles the world has ever seen, at affordable prices. And, for all this, we need your input and ideas. We welcome the conversations in the weeks and months ahead. Thank you.