The president says you'll save money, America will use less oil and exhaust pipe pollution will be cut by a third.
Backed by car makers and environmentalists, President Barack Obama said the new fuel efficiency standards will help break our dependence on oil.
"We will save 1.8 billion barrels of oil over the lifetime of the vehicles sold in the next five years," said President Obama.
The president said that's more oil than we imported last year from Saudi Arabia, Venezuela, Libya and Nigeria combined.
"This is the projected equivalent of taking 58 million cars off the road for an entire year," he said.
Environmentalists say the new federal regulations mean California will drop its battle for tougher state standards.
"We are thrilled. This is the biggest step any president has taken ever to curb our addiction to foreign oil, and also to reduce our global warming pollution," said Orli Cotel from the Sierra Club.
It's true the standards call for a 30 percent reduction of tail pipe emissions.
But if you look at the entire release of greenhouse gasses, oil makes up less than 50 percent worldwide, says the head of UC's Energy Institute.
"And this is going to change the greenhouse gas release from oil alone by only a few percentage points," said Professor Severin Borenstein, Ph.D. from the UC Energy Institute.
Professor Borenstein says the new rules will have a significant impact on the amount of oil the U.S. uses. And it will also increase the amount we pay for a new car, an extra $1,300 on average.
But the president and the EPA say that extra will be offset by fewer trips to the gas station.
"In three years time you will have paid off the investment," said President Obama.
At the White House on Tuesday, California Governor Arnold Schwarzenegger said the economic crisis is probably the reason automakers are willing to go along with the new standards.
"I'm sure that President Obama said OK we're going to give you the help, but here's what you need to do, and so I think certain things changed very quickly," said the governor.
The president's press secretary tried to put the kibosh on the governor's analysis, saying only two of the 10 car makers supporting the new rules have received federal assistance.
But UC Berkeley physicist Richard Muller says it does come down to money.
"The only reason they haven't done it in the past is they were making more money on their SUVs," said Muller.
And he says until now, U.S lawmakers were afraid.
"We were afraid that if we forced them to go the direction of low gasoline usage that they would go bankrupt," said Muller.
Two of the 10 auto companies at the White House are pretty close to bankruptcy.
Professor Muller wrote a book called "Physics for Future Presidents." He thinks presidents need to know the fundamentals to make policy decisions like those announced on Tuesday.