Major US automakers like GM, Ford, and Stellantis are shifting focus from EV development to traditional internal combustion and hybrid vehicles amid a broad rollback of federal emissions standards and incentives, sparking concerns over long-term competitiveness and climate goals.
Detroit’s major automakers are currently positioned to benefit significantly from a broad rollback of federal emissions regulations and electric vehicle (EV) incentives. Firms like General Motors (GM), Ford, and Stellantis are shifting billions—funds previously designated for the development of advanced EVs and compliance with strict regulations—toward the production of internal combustion engine (ICE) vehicles and hybrids. This shift highlights a notable change in the industry’s regulatory environment that spans multiple U.S. administrations.
For instance, Ford has already saved approximately $1.5 billion in regulatory credits this year alone, nearly offsetting the anticipated $2 billion net profit losses due to tariffs in 2025. The company has redirected resources from a canceled three-row electric SUV project to support future hybrid and gasoline-powered models, which typically offer higher profit margins. GM, having spent about $3.5 billion since 2022 on purchasing credits to satisfy fuel economy and emissions standards, now expects to see significant cost savings beyond 2026 as fines for compliance failures are eliminated. Stellantis is revisiting its Hemi V-8 engine platform, favoring traditional high-margin vehicles over battery-powered options. Analysts believe these regulatory relaxations could unlock a “multibillion-dollar opportunity” for Detroit’s automakers over the next couple of years.
The regulatory landscape has undergone substantial changes: the Environmental Protection Agency (EPA) plans to revoke its 2009 determination that greenhouse gases endanger public health, which strips away the legal basis for stringent emissions controls. Simultaneously, federal tax credits for EV purchases have been abolished, and fines for failing to meet fuel efficiency standards have been rescinded. Previously, automakers could offset these fines by purchasing credits—Tesla, for example, earned around $2.8 billion in 2024 from such transactions. With these mechanisms now eliminated, companies are adjusting their strategies and costs accordingly.
However, this policy shift has drawn criticism. Environmental advocates warn that the rollback could suppress incentives for cleaner vehicles and hinder U.S. efforts to reduce emissions. Analysts project EV sales might decrease by as much as 40% by 2030, risking factory closures and the cancellation of investments in EV infrastructure. Such a decline could lead to an additional 49 million tonnes of CO₂ emissions, undermining climate mitigation efforts.
Industry experts also voice concerns that emphasizing high-margin ICE vehicles could compromise the long-term global competitiveness of Detroit’s automakers. As markets in China and Europe rapidly advance in electrification, U.S. companies risk falling behind in EV innovation and market share. Cox Automotive analysts note that increased production of larger, more expensive vehicles could push the average new vehicle price in the U.S. above $50,000 by 2025, potentially limiting affordability for mainstream consumers and dampening overall vehicle sales.
Amid these regulatory changes, some automakers are adopting a cautious approach. While they capitalize on short-term profit opportunities from traditional vehicles, ongoing investments in EV infrastructure and plans to develop more affordable electric models continue. For example, Ford’s $3 billion EV battery plant in Marshall, Michigan, is about 60% complete and expected to begin battery production in 2026. Thanks to recent legislation favoring domestic manufacturing and restricting credits linked to certain Chinese parts, this plant is likely to qualify for federal incentives, illustrating how automakers are hedging their bets.
Furthermore, recent policy adjustments by the Biden administration aim to ease the timeline for EV adoption and provide automakers with more flexible ways to meet emissions standards. Although this has been beneficial for legacy automakers seeking more manageable targets, the broader industry still faces uncertainty. The potential for increased regulatory relaxations signals a shift away from aggressive EV mandates. This tendency could slow EV industry growth; for example, projections by S&P Global Mobility now estimate that U.S. EV sales by 2030 might reach only around 5 million annually, about 30% of the market, instead of previous forecasts exceeding 6.5 million vehicles, which anticipated a 40% EV market share.
In addition, some recent developments include ongoing efforts under the current administration to revisit environmental regulations. While not as expansive as previous policies, these efforts include proposals under various agencies to modify fuel economy standards beyond model year 2027 and revise long-term CO₂ standards. This evolving regulatory environment offers short-term financial relief for Detroit automakers but also raises questions about their long-term competitiveness amid a rapidly transforming global automotive industry.
Overall, Detroit’s automakers are now experiencing a significant deregulation-driven profit boost, primarily through enhanced focus on traditional ICE vehicles and hybrids. Yet, they must carefully navigate the future landscape marked by technological advances and international competition, balancing immediate gains with the strategic need to stay competitive in an increasingly electrified world.
Source: Noah Wire Services
