For a preview of how President-elect Trump will regulate the auto industry, look to his first administration, which weakened standards that require automakers to reduce vehicle tailpipe emissions.
Under President Biden, the Environmental Protection Agency unveiled what were touted as the strongest-ever standards. Now, Trump is preparing to make good on his campaign promise to “end the EV mandate,” or roll back policies aimed at decarbonizing the transportation sector, which accounts for nearly one-third of US greenhouse gas emissions.
Auto execs and their compliance teams have surely been preparing for such a scenario. But they’ll be watching closely in the coming months to see how, exactly, the Trump administration will alter key regulations like emissions standards.
“There’s a lot of war room meetings going on right now,” S&P Global Mobility analyst Michael Robinet told us. “We are still a long-range, high-capital industry; bets we make in 2022 start paying off in 2025, 2026, 2027.”
Industry leaders are used to navigating an ever-shifting regulatory landscape. But such changes would come at a time when automakers have already bet big on electrification, pouring billions of dollars into EV and battery development and production.
“The industry is not as flexible as legislators think we are,” Robinet added. “It’s a long-lead industry and you have to plan for as many outcomes as possible, within a boundary of trying to continue to make money.”
Expected changes
The incoming administration reportedly is planning to roll back fuel efficiency and emissions regulations, similar to what Trump did when he took office in 2017. S&P analysts anticipate that the new administration will move as quickly as rule-making processes allow.
This year, the EPA rolled out emissions standards for model years 2027–2032 that would have pushed EVs to as much as 56% of new light-duty vehicle sales by the end of that period, which would have reduced CO2 emissions by an estimated 7.2 billion tons.
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Now, emissions standards for light-duty vehicles through model year 2028 could be delayed, and targets for model year 2032 vehicles could be extended, per S&P. The new administration also could implement less-stringent standards for post-2032 models.
“The brands that will rise to the top are the ones who have done their due diligence in scenario planning and have the agility to adjust to new production requirements and procurement challenges,” Jessica Caldwell, Edmunds’ head of insights, said in a statement via PR rep Talia James-Armand. “Most short-term product roadmaps might flex but are unlikely to completely change even as the pendulum swings in a new direction.”
Going to California
One big question mark is California’s special authority to set its own emissions standards. Currently, automakers are juggling different sets of standards because California’s are stricter than the EPA’s––and numerous states follow California’s.
Experts believe the Trump administration will move to block California’s ability to do this, something his first administration did. Litigation over California’s authority could even end up before the Supreme Court.
Bottom line
Experts expect the cumulative effect to be a slower near-term EV transition. In the meantime, automakers likely will rework their product pipelines and integrate more hybrids.
On the one hand, Robinet said, these changes could give automakers a longer runway to squeeze profits out of ICE vehicles. But it puts them in a challenging position given that they’ve already spent massive amounts of capital scaling up EV production.
“I’m sure what they all want for Christmas is a stable, risk-reduced structure in which to build their vehicles,” Robinet said. “But that is certainly not what has emerged. Every time the goal posts get moved, you’ve gotta move your team and come up with a new play.”