Automakers faced sweeping changes in the past year as President Donald Trump terminated incentives and rolled back regulations designed to boost the electric-powered vehicle industry.
The Trump administration has pursued a series of policy changes aimed at reducing costs for automakers and consumers, including rolling back emissions standards, ending incentives for consumer purchases of electric vehicles, and issuing broad tariffs.
While some of the changes could offer short-term relief for manufacturers, critics warn they risk undermining the long-term global competitiveness of U.S. automakers and may not save consumers money. Opponents also argue that the policy shift is a step backward in tackling emissions and climate change.
Supporters, on the other hand, claim the measures promote consumer choice, keep vehicle prices down, and support domestic manufacturing.
Fuel economy rules
The Trump administration has rolled back several auto regulations implemented under President Joe Biden, arguing that they amounted to an “electric vehicle mandate.”
The administration has argued that measures aimed at boosting the EV industry cost automakers by forcing them to comply with stringent emission standards and deadlines to build a certain number of electric cars. The administration has also said that the cost of building an electric car is passed on to consumers when purchasing a new vehicle, limiting consumer choice.
Most recently, the Trump administration proposed weakening the Corporate Average Fuel Economy standard, which requires manufacturers to ensure their fleets meet an average miles-per-gallon target for cars and trucks. The administration’s proposal would reduce the annual fuel-economy targets for cars and trucks, resulting in a fleet average fuel economy of 34.5 mpg by model year 2031, down from the 50.4 mpg envisioned under the Biden standard.
Under the Biden administration’s standards, automakers could improve their fleet’s fuel-economy average by manufacturing more EVs and hybrids. The Trump proposal, however, would allow automakers to meet the standards using gasoline cars instead of electric.
The administration has claimed that its proposal will save consumers thousands of dollars on new cars and benefit the domestic industry.
Critics, though, argue that the rewrite will not yield savings.
“I think this is an example of something being done for political reasons that may not actually see real results in the real world,” James Bowe, an attorney at King & Spalding, told the Washington Examiner.
Bowe said that automakers are unlikely to go back to the lower fuel efficiency target of five to 10 years ago.
“I don’t think that consumers are going to want to see that even if gas prices are low today, the next car they buy is going to use more of that than the car they would have bought a few years ago,” Bowe said.
Emission standards rollback
At the same time, Trump has also repealed waivers granted to California by the Biden administration’s Environmental Protection Agency that allowed the state to require manufacturers to build a certain number of EV cars and trucks in an effort to transition away from gasoline cars and ban them by 2035.
Several other states had adopted California’s standards. The Trump administration had said that the rules effectively imposed a nationwide EV mandate. California is currently pursuing litigation against the administration.
In June, Trump said, “Under the previous administration, the federal government gave left-wing radicals in California dictatorial powers to control the future of the entire car industry, all over the country, all over the world.”
Loren McDonald, CEO and chief analyst at EV charging data firm Chargeonomics, told the Washington Examiner the rollbacks to emission standards create uncertainty for automakers, but may provide them with more time to improve electric vehicle technology.
“The thing that automakers hate more than anything is uncertainty and change. They’ve literally been pulling their hair out for the last 12 or 16 years, because whoever’s in office, the wind blows in a different direction,” McDonald said.
But, he added that “All of these sorts of policy changes will allow a lot of legacy automakers to kind of get their act together in parallel while they focus on profitability.”
Additionally, the EPA has proposed withdrawing the 2009 Endangerment Finding, which concluded that six greenhouse gases, including carbon dioxide and methane, pose a threat to public health and welfare. If finalized, the rule would repeal emission standards for light-, medium-, and heavy-duty vehicles, as well as heavy-duty engines.
EPA Administrator Lee Zeldin has previously argued that the agency lacks the authority to regulate greenhouse gas emissions.
“We do not have that power on our own to decide as an agency that we are going to combat global climate change because we give ourselves that power. We will follow the law,” Zeldin said.
The end of the EV tax credits
Beyond rolling back emission standards, the Trump administration has also ended incentives for electric vehicles. In July, Trump signed the One Big Beautiful Bill Act, which slashed hundreds of billions of dollars in clean energy tax credits that the Biden administration enacted through the 2022 Inflation Reduction Act.
The tax bill eliminated the IRA’s EV tax credits, which offered consumers up to $7,500 for purchasing a new EV and $4,000 for a used one. The credits expired on Sept. 30.
The EV tax credits were intended to encourage consumers to purchase battery-powered vehicles. But Trump and Republicans have criticized the tax incentives as overly costly and as tilting the market in favor of EVs.
These reversed policies and eliminated incentives have led automakers to revamp their strategies. Earlier this month, Ford announced it would scale back its production of electric cars, citing overestimated demand, regulatory changes, and high costs. General Motors also announced in October that it plans to lay off thousands of employees at EV plants across the country.
The policy shifts also come as global EV competition intensifies. China is currently dominating the EV landscape, as many of its vehicles make their way into Europe, South America, and other places around the globe.
Some experts have argued that the reversal of policies favoring EVs could hold back the U.S. automakers from competing with global EV makers.
Albert Gore, executive director of the Zero Emission Transportation Association, told the Washington Examiner, “If we look at the U.S. auto market in the context of the global auto market, it is a fair question as to whether we want to be globally competitive as an exporter of vehicles or not?”
Currently, there are high tariffs on Chinese-made electric vehicles, making it nearly impossible for Chinese automakers to sell their vehicles to the U.S.
Tariffs
Even as domestic regulations ease, automakers this year still faced the uncertainty of Trump’s trade policies.
Most American car manufacturers import their parts from other countries. However, the Trump administration announced plans earlier this year to impose 25% tariffs on all imported vehicles, including those from Mexico and Canada.
The tariffs exempt automobiles that meet U.S.-Mexico-Canada rules and apply to parts imported from outside of the three countries. The U.S. and the European Union also reached a bilateral deal that would impose 15% tariffs on EU cars and auto parts. The administration reached a deal with Japan to lower tariffs on automobiles and auto parts to 15% as well.
The administration has argued that the tariffs will encourage more domestic manufacturing and reduce reliance on foreign auto parts.
Earlier this year, the White House said in a statement, “President Trump is taking action to protect America’s automobile industry, which is vital to national security and has been undermined by excessive imports threatening America’s domestic industrial base and supply chains.”
Gore noted that the automakers this past year have had to adjust to the unpredictable tariffs the administration introduced or delayed.
“At times, it has increased the cost of doing business in the United States, which has just been extremely challenging for any manufacturer, particularly manufacturers who have announced investments, or had investments underway … an increased cost just means increased risk of an investment,” Gore said.
The Trump administration imposed tariffs on auto imports as a means to bolster the domestic auto industry and create jobs in the U.S.
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Though McDonald said that “tariffs are attacks,” adding that the cost of a lot of parts that go into gas engines comes from outside of the United States.
