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Trump Administration Set to Slash Fuel Economy Standards in Major Policy Reversal

MarketDash Editorial Team
5 days ago
The White House is preparing to dramatically roll back fuel efficiency requirements for vehicles made between 2022 and 2031, marking another shift away from electric vehicles and toward traditional gas-powered cars. The move could reshape automaker strategies and hit EV manufacturers' bottom lines.

The Trump administration is preparing to unveil what could be one of its most consequential automotive policy changes yet: a dramatic loosening of fuel economy standards originally set under President Biden. According to a Reuters report citing sources familiar with the matter, President Donald Trump plans to announce the proposal at a White House event on Wednesday, with top executives from America's Big Three automakers expected to attend.

What's Actually Changing

The National Highway Traffic Safety Administration (NHTSA) is poised to recommend substantial reductions in fuel economy requirements for vehicles manufactured between 2022 and 2031. That's a pretty wide swath of the automotive landscape, covering both vehicles already on the road and models still in development.

This isn't the first time Trump has taken aim at fuel economy regulations. Earlier this year, he signed a bill eliminating fuel-economy penalties for automakers. NHTSA has also been reviewing fines that would apply retroactively to 2022 model year vehicles. Those fines aren't theoretical—Stellantis N.V. (STLA), which owns Jeep and Dodge, has already shelled out more than $190.6 million in penalties for missing fuel-economy targets. That includes $78.3 million paid in March and $112.3 million in June for its 2019 and 2020 model lineups.

Part of a Larger Pattern

The fuel economy rollback fits into a broader regulatory shift favoring internal combustion engines over electric vehicles. The administration ended the $7,500 federal EV tax credit effective September 30, a move that drew criticism even from Trump ally and Tesla (TSLA) CEO Elon Musk. It has also moved to ease CAFE fuel-economy standards, reduce emissions requirements, and lower the pressure on automakers to pursue zero-emission vehicle credits.

Perhaps most significantly, the Environmental Protection Agency has proposed reversing the 2009 Endangerment Finding—the legal cornerstone that enables federal regulation of greenhouse gas emissions from vehicles. Without that finding, much of the EPA's authority to regulate automotive emissions could disappear.

Back in March, the EPA announced plans to revisit 2024 rules that would have cut passenger vehicle emissions by nearly 50% by 2032. Those standards anticipated that between 35% and 56% of new vehicles sold from 2030 to 2032 would need to be electric—a target that Ford Motor Co. (F) had publicly supported.

The EV Industry Takes a Hit

For electric vehicle manufacturers, these policy changes aren't just philosophical disagreements—they're hitting the bottom line. In August, reports indicated that Rivian (RIVN) faced nearly a $100 million revenue shortfall directly tied to the Trump administration's fuel economy rollbacks. The NHTSA stopped issuing the paperwork needed to finalize regulatory credits, creating significant revenue delays for Rivian and its competitors.

Tesla has been vocal in urging the EPA not to repeal emissions standards connected to the 2009 Endangerment Finding. The company warned that doing so would disrupt the entire auto industry, threaten American leadership in the sector, and wipe out revenue from zero-emission vehicle credits—which brought Tesla nearly $2.8 billion in recent earnings.

The stakes are high not just for EV startups and Tesla, but for the legacy automakers trying to navigate a regulatory environment that now seems to be pulling in the opposite direction from where it was headed just a few years ago. How they adjust their product plans and investments could reshape the American auto industry for the next decade.

Back to News

Trump Administration Set to Slash Fuel Economy Standards in Major Policy Reversal

MarketDash Editorial Team
5 days ago
The White House is preparing to dramatically roll back fuel efficiency requirements for vehicles made between 2022 and 2031, marking another shift away from electric vehicles and toward traditional gas-powered cars. The move could reshape automaker strategies and hit EV manufacturers' bottom lines.

The Trump administration is preparing to unveil what could be one of its most consequential automotive policy changes yet: a dramatic loosening of fuel economy standards originally set under President Biden. According to a Reuters report citing sources familiar with the matter, President Donald Trump plans to announce the proposal at a White House event on Wednesday, with top executives from America's Big Three automakers expected to attend.

What's Actually Changing

The National Highway Traffic Safety Administration (NHTSA) is poised to recommend substantial reductions in fuel economy requirements for vehicles manufactured between 2022 and 2031. That's a pretty wide swath of the automotive landscape, covering both vehicles already on the road and models still in development.

This isn't the first time Trump has taken aim at fuel economy regulations. Earlier this year, he signed a bill eliminating fuel-economy penalties for automakers. NHTSA has also been reviewing fines that would apply retroactively to 2022 model year vehicles. Those fines aren't theoretical—Stellantis N.V. (STLA), which owns Jeep and Dodge, has already shelled out more than $190.6 million in penalties for missing fuel-economy targets. That includes $78.3 million paid in March and $112.3 million in June for its 2019 and 2020 model lineups.

Part of a Larger Pattern

The fuel economy rollback fits into a broader regulatory shift favoring internal combustion engines over electric vehicles. The administration ended the $7,500 federal EV tax credit effective September 30, a move that drew criticism even from Trump ally and Tesla (TSLA) CEO Elon Musk. It has also moved to ease CAFE fuel-economy standards, reduce emissions requirements, and lower the pressure on automakers to pursue zero-emission vehicle credits.

Perhaps most significantly, the Environmental Protection Agency has proposed reversing the 2009 Endangerment Finding—the legal cornerstone that enables federal regulation of greenhouse gas emissions from vehicles. Without that finding, much of the EPA's authority to regulate automotive emissions could disappear.

Back in March, the EPA announced plans to revisit 2024 rules that would have cut passenger vehicle emissions by nearly 50% by 2032. Those standards anticipated that between 35% and 56% of new vehicles sold from 2030 to 2032 would need to be electric—a target that Ford Motor Co. (F) had publicly supported.

The EV Industry Takes a Hit

For electric vehicle manufacturers, these policy changes aren't just philosophical disagreements—they're hitting the bottom line. In August, reports indicated that Rivian (RIVN) faced nearly a $100 million revenue shortfall directly tied to the Trump administration's fuel economy rollbacks. The NHTSA stopped issuing the paperwork needed to finalize regulatory credits, creating significant revenue delays for Rivian and its competitors.

Tesla has been vocal in urging the EPA not to repeal emissions standards connected to the 2009 Endangerment Finding. The company warned that doing so would disrupt the entire auto industry, threaten American leadership in the sector, and wipe out revenue from zero-emission vehicle credits—which brought Tesla nearly $2.8 billion in recent earnings.

The stakes are high not just for EV startups and Tesla, but for the legacy automakers trying to navigate a regulatory environment that now seems to be pulling in the opposite direction from where it was headed just a few years ago. How they adjust their product plans and investments could reshape the American auto industry for the next decade.