'NHTSA is on a path already to go way beyond 35 (mpg) by 2020,' German said. 'It's going to go much, much higher than that. It's going to be much more dramatic than we thought. This is going to drive a lot of innovation and we're not going to have a choice.'

In April, NHTSA proposed a faster-than-expected five years of annual 4.5 percent increases through the 2015 model year that would require passenger cars to average 35.7 mpg and light trucks 28.6 mpg -- above the 3.3 percent annual increases required by Congress.

Detroit's Big Three automakers and Toyota Motor Corp. have urged NHTSA to pare back its proposed increases, saying they would cost thousands of jobs and reduce vehicle sales by making autos more expensive. NHTSA said the new requirements would cost the auto industry $47 billion through 2015.

Likely Democratic nominee Sen. Barack Obama has proposed doubling fuel efficiency standards to 50 mpg by 2027.

German also urged automakers not to bring vehicles to market prematurely.

'We can't be putting vehicles out there that don't work properly,' German said. 'If a manufacturer does put out a lot of vehicles that don't work properly -- not only is that could going to dramatically hurt the manufacturer's reputation -- that could also set back public acceptance of that technology for all manufacturers.'