Three of the nation’s largest automakers, Ford, General Motors and Stellantis, are strategizing with other car manufacturers on how to make a delicate request of President-elect Donald Trump: Don’t scrap the federal regulations that compel the industry to sell electric vehicles.
The conversation would require diplomatic finesse. Trump has railed against the EV rules, which strictly limit the amount of tailpipe pollution while also ramping up fuel economy standards. They are designed to get carmakers to produce more EVs and have been a cornerstone of President Joe Biden’s fight against climate change.
Trump sees them differently. He has falsely said the rules amount to a Democratic mandate that would prevent Americans from buying the gasoline-powered cars of their choice – a concern of his campaign donors from the oil industry.
And Trump still holds grievances against some of the automakers, whom he views as having betrayed him because during his first term they supported Obama-era auto emissions rules.
In fact, most automakers don’t love the more stringent rules Biden put in place. But they have already invested billions in a transition to electric vehicles and fear that if Trump made an abrupt change as he has promised, they could be undercut by automakers who sell cheaper, gas-powered cars. They argue it would harm an industry that is a backbone of American manufacturing and employs 1.1 million people.
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.
One wild card in negotiations is Elon Musk, the top Trump adviser and CEO of Tesla, which accounts for half of electric vehicle sales in the United States.
In a previously unreported Nov. 12 letter to Trump, John Bozzella, president of the Alliance for Automotive Innovation, which represents 42 car companies that produce nearly all the new vehicles sold in the United States, wrote that in order for the auto industry to remain “successful and competitive,” it needed “stability and predictability in auto-related emissions standards.”
Transportation is the sector of the U.S. economy that produces the most greenhouse gases – pollution that is dangerously heating the planet. The Obama administration was the first to limit tailpipe emissions of such pollution. During his first term, Trump effectively erased those rules, replacing them with standards that were little more than business as usual.
Biden restored and, with input from the automakers, significantly strengthened the tailpipe rules, making them the biggest regulations enacted by the federal government to fight climate change. The regulations affect vehicles starting in model year 2027 and grow more stringent through 2032. Automakers could comply by selling a mix of gasoline-burning cars, hybrids, EVs or other types of vehicles, such as cars powered by hydrogen.
The EPA estimates that compliance with the rule would mean that by 2032, about 56 per cent of new passenger vehicles sold would be electric and another 16 per cent would be hybrids, up from about 9 per cent and 11 per cent today, respectively. Car companies that don’t meet the new restrictions could 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, collecting $2.1-billion in the first nine months of this year alone, which was 43 per cent of its net profit, according to regulatory filings. During Tesla’s early years, the credits were a critical source of revenue that probably prevented the company from going bankrupt, analysts say.
Electric vehicle supporters had hoped that Musk would persuade Trump to retain the EV rules. But that seems unlikely; he is now poised to lead the Trump administration’s initiative to reduce regulations.
And Musk is more focused on removing government obstacles to self-driving cars, which he has described as central to Tesla’s future, said people familiar with his thinking, who spoke on the condition of anonymity because they were not authorized to publicly discuss it.
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 clear that 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. The credit has helped to make EVs competitive with gas-powered vehicles and has been a particular target of Trump’s.
“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 $7,500 tax credit may damage Tesla, but it would hurt Ford, GM and others more, Musk said during an earnings call in July. “I think it would be devastating for our competitors and for Tesla slightly,” he said.
That is almost certainly true for several reasons, auto industry analysts said.
One is the scale of investment that American carmakers have made in electric vehicles. Ford, GM, Stellantis and others have invested about $146-billion over the past three years in the design, engineering and manufacturing of electric vehicles, according to the Center for Automotive Research, a nonprofit organization in Ann Arbor, Michigan.
For example, there were fewer than half a dozen EV battery plants in the United States when Trump first came into office in 2017. Today there are more than three dozen, many of them joint ventures between automakers and battery companies, according to the Alliance for Automotive Innovation.
Except for Tesla, most automakers still sell electric vehicles at a loss because they have not yet recouped their investments. They also need to sell at scale to bring down production costs, and while EV sales in the United States are still growing, the pace has slowed.
Still, virtually all auto executives expect electric vehicles to displace gasoline cars over time, and if the American carmakers falter now, they risk being overtaken by carmakers from Europe and China.
Ripping up the pollution rules could imperil those investments and harm the American industry’s ability to compete globally, analysts said.
“The regulations determine that all automakers have to follow the same rules,” said Stephanie Brinley, an analyst for the Auto Intelligence service at SandP Global Mobility. “You don’t want one automaker sticking to making the cheapest fossil fuel cars to sell domestically, while the other automakers are trying to make these investments to compete globally. If you have a regulation on the books, then everybody has to play by the same rules.”
Rolling back the rules would also pose a problem because automakers plan car models years in advance. Developers in Detroit have already designed the cars they expect to put in showrooms in 2028, under the assumption that the EV 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,” Brinley said.
The automakers are also hoping to press the point with Trump that many of their new EV 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.
But the automakers are treading with care, concerned that Trump might bear a grudge against companies that publicly 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 J. Pyle, president of the American Energy Alliance, a conservative research group focused on energy, who served on the first Trump administration’s transition team.
Among Trump’s biggest grievances with automakers includes 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 blindsided and enraged Trump, since it came as his administration was moving to weaken federal emissions standards and to revoke California’s legal authority to set its own rules. He appeared to seek revenge by opening an antitrust investigation into the automakers that signed on to the California deal. Later on, two more companies – Stellantis and Volvo – joined the companies that sided with California. All those companies remain bound to that deal.
Mary Barra, CEO of GM, who has shown herself to be nimble in repositioning her company to align with the priorities of a changing Oval Office, took a different tack. She met with Trump in his first weeks in office and urged him to weaken the pollution standards and joined the Trump administration’s legal proceedings against the California deal.
But within weeks of Biden’s election in 2020, Barra reversed course, dropping GM’s legal support of the Trump administration’s California case and cheering Biden’s electric vehicle agenda.
In a letter at the time 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.”
Trump was furious.
Barra further cemented her relationship with Biden in 2022, when GM hired his niece, Missy Owens, as its head of environmental, social and corporate governance.
Barra has insisted that GM’s strategy is not dependent on politics. The company’s investments in batteries were “something we started well before I even knew what IRA was going to be or that it would be passed,” she said in an interview last month.
Auto lobbyists familiar with the Trump transition, who spoke on the condition of anonymity because they were not authorized to talk publicly, described a scenario in which the Big Three auto companies would need to bow to Trump.
“General Motors is going to have to come back in and make nice with Trump,” said Christopher Grundler, a former top auto pollution regulator who worked at the EPA from the Carter through the Biden administrations.
It appears that GM is trying to follow that advice.
After the July assassination attempt on Trump, Barra wrote on X, “I wish President Trump all the best for a full recovery.”
Trump’s inauguration committee has asked GM to provide about 250 vehicles for VIPs during the inauguration, and the company intends to support the event “in a big way,” according to a person familiar with the matter. It is not yet known if any of the vehicles will be electric, the person said.
Asked about Barra’s relationship with Trump, GM’s head of corporate affairs, Faryl Ury, along with other GM officials, directed inquiries to Arthur Schwartz, a longtime Republican strategist and adviser to Donald Trump Jr. Schwartz is reportedly consulting to companies seeking to build relationships with the president-elect. Schwartz, who has worked with Trump adviser Steve Bannon, declined to comment on the record.
It is possible that the efforts by the carmakers could yield results, said Mike Murphy, a Republican strategist and CEO of the EV Policy Project, an effort to end the partisan divide over electric vehicles.
“If the message is ‘mend it, don’t end it,’ that might get through,” Murphy said of the EV rules. “Trumpworld is a weird mix of grievance, instinct and transactional outlook. Despite what he says on the campaign trail, everything he says is written in pencil.”