US Automakers Face Major Changes To EV And Emissions Policies

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Ford, GM, Stellantis, and other US automakers and suppliers have invested nearly $146 billion over the past three years in the design, engineering, and manufacturing of electric vehicles according to the Center for Automotive Research in Ann Arbor, Michigan. But in MAGAmerica, much of that investment could be wasted if the incoming enfant terrible decides to gut the exhaust emissions rules hammered out between the Biden administration and the auto industry last year.

The New York Times reports that automakers aren’t pouring money into EVs any more. Instead, they are mounting lobbying campaigns designed to convince the incoming occupant of the Offal Office not to tear up that agreement — something he has promised to do. That conversation would require diplomatic finesse, the Times says, which is an understatement if there ever was one. Trump still holds grievances against some of the automakers, who he thinks betrayed him because during his first term when they supported Obama-era auto emissions rules instead of the ones he was proposing.

Lobbyists and officials from several car companies say the automakers want the Biden regulations to remain largely intact, with some changes such as more time for compliance and lower penalties for companies that don’t meet the requirements. It’s not that they love the current rules, but they are trying to pay for their transition to electric cars with profits from their conventional cars. If the rules get tossed overboard, they fear other companies that have not invested heavily in electric cars could undercut their prices with devastating consequences. If that were to happen, potentially 1.1 million jobs in the automotive sector could be at risk.

Tearing Up Emissions Rules

The current regulations affect vehicles starting in model year 2027 and become more stringent through 2032. Automakers will be able to comply by selling a mix of gasoline powered cars, hybrids, EVs, or cars powered by hydrogen. Trump insists on calling these regulations an electric car mandate, even though they are an “all of the above” solution that Republicans profess to adore.

The EPA estimates that as a result of the current rules, about 56 percent of new passenger vehicles sold would be electric and another 16 percent would be hybrids by 2032. That’s up from about 9 percent and 11 percent today. Companies that don’t meet the new restrictions would face substantial penalties or could purchase “emissions credits” from companies that have exceeded the standards by selling more EVs. Tesla, which makes only electric vehicles, has earned billions of dollars by selling emissions credits to other automakers. It collected $2.1 billion in the first nine months of this year alone — 43 percent of its net profit. During Tesla’s early years, the credits were a critical source of revenue that may have helped stave off bankruptcy for the company.

John Bozzella is the president of the Alliance for Automotive Innovation, which represents 42 car companies that produce nearly all the new vehicles sold in the United States. In a letter to Trump on November 12, he wrote that for the auto industry to remain “successful and competitive,” it needs “stability and predictability in auto-related emissions standards.” That is undoubtedly true, but since Trump is notorious for not reading things — like the daily intelligence briefing — it is doubtful the letter will have much impact.

Automakers plan car models years in advance and have already designed the cars they expect to sell in 2028 under the assumption that the emissions rules would still be in place. “The worst thing of all for the automakers, even worse than a difficult regulation, is a back and forth swing every four years. The regulations determine that all automakers have to follow the same rules,” said Stephanie Brinley, of S&P Global Mobility. Virtually all auto executives expect electric vehicles to displace gasoline cars eventually. If American carmakers give up on their EV plans now, they risk being overtaken by carmakers from Europe and China, or so the thinking goes. CleanTechnica‘s Zach Shahan and Scott Cooney discussed this at length in a recent YouTube discussion.

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Holding Grudges & Settling Scores

The companies are treading lightly when it comes to the the policies they would like to see from the incoming administration. Many are concerned Trump might hold a grudge against them because they opposed his first term efforts to erase the Obama EV rules. “Given their track record with Trump, I don’t know how much sway the autos will have in terms of the decision the president makes,” said Thomas Pyle, president of the American Energy Alliance, a conservative research group, who served on the first Trump administration’s transition team.

Among Trump’s biggest grievances is a 2019 legal agreement that four of the world’s largest automakers — Ford, Volkswagen, Honda, and BMW — secretly struck with the state of California to reduce their tailpipe emissions according to stringent limits set by that state. The move enraged Trump, since it came as his administration was attempting to revoke California’s authority to set its own rules. To exact revenge, his administration filed an antitrust investigation into those automakers. Later on, two more companies — Stellantis and Volvo — joined the companies that sided with California.

Mary Barra, the chief executive of GM, has shown herself to be the most malleable when it comes to positioning her company to take advantage of changes in the political winds. She met with Trump in his first weeks in office and urged him to weaken the pollution standard. She also had her company join the administration’s legal proceedings against the California deal. But just weeks after Biden’s election in 2020, she reversed course by dropping GM’s legal support of the Trump administration in its suit against California, and cheered Biden’s electric vehicle agenda. In a letter to environmental groups, Barra wrote, “President-elect Biden recently said, ‘I believe that we can own the 21st century car market again by moving to electric vehicles.’ We at General Motors couldn’t agree more.”

She further cemented her relationship with Biden in 2022 when GM hired his niece, Missy Owens, to be the company’s head of ESG. Perhaps the kindest thing one can say about Barra is that she is a flexitarian when it comes to politics. The Trump inauguration committee has asked GM to provide about 250 vehicles for VIPs during the inauguration, which the company intends to support “in a big way,” according to a person familiar with the matter. We don’t know yet if any of those vehicles will be electric, but don’t bet on it.

The manufacturers hope to impress on Trump that many of their new manufacturing facilities and battery plants, which are generating jobs and tax revenue, are in states like Ohio, Tennessee, Georgia, and South Carolina that he won in this year’s election. When he was last in office, there were fewer that 6 such facilities. Now, there are over three dozen, most of them in so-called red states whose elected officials rather like the employment opportunities they provide. But that assumes Trump is rational, which he is not.

Elon Will Game The System To Enrich Himself

One wildcard in all of this is Elon Musk, the carpetbagger from South Africa who is primarily focused on removing government obstacles to self-driving cars, which he says are vital to Tesla’s future. As for the emissions standards, Tesla prepared in advance for their elimination, said Rohan Patel, who served as vice president of global policy for Tesla before stepping down earlier this year. “They predicted that if a Republican won, no matter how influential Elon was, the rule would be weakened for sure or potentially go away,” he said.

Musk has also made it clear he will not fight to preserve the $7,500 tax credit for buyers of electric vehicles that is provided by the 2022 Inflation Reduction Act. Why? Because getting rid of it could bankrupt other automakers in years to come and make him richer, not because it will benefit America. See how this works now? The people get dumped on while the oligarchs get wealthier. The EV tax credit was designed to make EVs more competitive with gasoline-powered vehicles and has been a particular target of Trump.

“In my view, we should end all government subsidies, including those for EVs, oil and gas,” Musk said on X last week. Getting rid of the tax credit might damage Tesla, but it would hurt Ford, GM and others more. During an earnings call in July, Musk said, “I think it would be devastating for our competitors and for Tesla slightly.” He is salivating at the prospect of his competitors being devastated. Who cares if tens or hundreds of thousands lose their jobs? Tough cookies for them, right? According to Autoblog, the repeal of the EV tax credit is being championed by billionaire oil mogul Harold Hamm, who leads Trump’s energy policy transition team, along with North Dakota Governor Doug Burgum, who is scheduled to be the next Secretary of the Interior. Naturally, oil and gas subsidies will not be removed, no matter what Musk thinks.

The Takeaway

Trump is 100 percent transactional. Anything he does has to reflect credit on him or enrich him personally. Musk and Trump had a bromance in 2017 that fell apart after about 6 months. Will this new love affair last even that long? Musk says he wants to get rid of all subsidies, but if he tries to mess with those that benefit oil, methane, and coal interests, he will provoke a withering backlash from those industries. The heads of the major car manufacturers must be having sleepless nights trying to understand how Elon came to be in charge of their fates.

US consumers should plan for a glut of enormous pickup trucks and gargantuan SUVs. Lower prices? Forget about it. The automakers have to recoup their $146 billion investment in EVs somehow, and profits from those gas guzzlers is how they plan to do it. Brace yourself for price increases on conventional cars once the EV tax credit is demolished, and get ready for a time when 7- and even 8-year car loans are common. Buckle up and enjoy the ride. This is what America wanted and now it is going to get it — in spades.