It's official. After a long and contentious battle, the government and automakers have settled on the new 2025 Corporate Average Fuel Economy (CAFE) regulations that will begin taking effect in 2017.

At a ceremony today in Washington, D.C., President Obama announced that the new CAFE standards for vehicle fleets will be 54.5 mpg by 2025. The increase piggybacks Obama's 2009 mandate for a CAFE average of 35.5 by 2016 and is the largest mandatory fuel economy increase in history. The standard is just shy of the 56.2 mpg average that the Obama administration was considering just a month ago (though not nearly as ambitious as the 62 mpg target the government floated at one time).

The ambitious new standards have encountered strong opposition from automakers, who suggest that the rules will mean large increases in cars' sticker prices. But, as part of the announcement (where the CEOs of the Detroit big three and several foreign automakers were in attendance), Obama said that consumers would save an average of $8000 per vehicle in reduced fuel costs once the regulations are in full effect in 2025.

Make no mistake about it: The new regulations are hugely important. They will save consumers boatloads of money they would've spent on gas, drastically reduce American's fuel consumption and carbon footprint and change the way cars are made. But, they present a major challenge to automakers, who must determine what technologies or combination of technologies will allow average fleet fuel economy to climb so high. They've got a lot of work to do.

Mandel Ngan/AFP/Getty Images

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