By David Shepardson, Rachael Levy and Chris Kirkham
WASHINGTON (Reuters) – President Donald Trump’s new administration plans to target federal regulations, championed by President Joe Biden, that aim to make cars more fuel efficient and spur a shift to electric vehicles, according to two sources speaking in liaise with Trump’s transition team.
The move appears aimed at fulfilling a Trump campaign promise to “end the EV mandate,” and would mirror a similar move during the first Trump administration to dismantle Obama-era vehicle efficiency regulations.
While no such “EV mandate” exists, the Biden administration’s regulations would effectively require automakers to shift at least 35% of production to electric vehicles to meet 2032 requirements, and a gradual phase-out of the encourage production of fossil fuel vehicles. fuels.
The new administration plans to weaken fuel efficiency and tailpipe emissions standards finalized earlier this year by the U.S. National Highway Traffic Safety Administration and the Environmental Protection Agency, the sources said. One of the sources said Trump is expected to formally order these agencies to reconsider the Biden rules.
The effort would go against the interests of EV maker Tesla (NASDAQ:) Inc, run by Trump backer Elon Musk, which profits from selling regulatory credits to traditional automakers that cannot meet stricter vehicle emissions regulations.
Trump’s transition team did not respond to a request for comment.
The move to undo Biden’s vehicle efficiency rules was first reported by Bloomberg.
Last week, Reuters exclusively reported that Trump’s transition team plans to end the $7,500 consumer tax credit for electric vehicle purchases — another move that would likely slow the already stagnant U.S. EV transition.
During the first Trump administration, it took nearly three years to undo similar Obama-era regulations. After Trump called for a review of the rules in early 2017, NHTSA and the EPA began the formal process of rewriting the rules in 2018. It took until March 2020 for both agencies to finalize less stringent rules.
One of the sources said the measure is intended to appease automakers who have complained that the Biden rules are too onerous.
The fuel economy and vehicle emissions standards that the Biden administration finalized this year were significantly less stringent than originally proposed after automakers lobbied for revisions.
General Motors (NYSE:), Ford (NYSE:), Stellantis (NYSE:), Tesla and the Alliance for Automotive Innovation, a trade group representing most major automakers except Tesla, did not respond to requests for comment.
After Trump’s first election victory in 2016, automakers pushed to relax Obama-era rules, arguing they were too expensive and would hinder American job growth. The calculus is different now, says Morningstar Research Services analyst Seth Goldstein, as Detroit automakers have “invested heavily” in electric cars.
“They are much more sophisticated in their strategy,” he said.
The move to focus on vehicle efficiency standards could be a blow to Tesla, which has made billions of dollars in recent years by selling credits to other automakers that can’t meet federal vehicle standards and other emissions regulations in U.S. states and other markets around the world. world. .
Because Tesla only sells electric vehicles, the company overcomplies with regulations and generates credits that it can sell to others. Relaxing standards makes those credits less valuable.
Tesla CEO Musk was one of Trump’s biggest backers and has become an influential advisor since the election.
During the Biden administration, Tesla pushed for much stricter vehicle emissions regulations than what the EPA ultimately approved.
Goldstein, the Morningstar analyst, said he expects Tesla will still be able to benefit from selling credits to automakers that must meet stricter emissions rules in states such as California and in the European Union.
He said selling credits was “much more important” to Tesla’s business model before the company was profitable. Now, he said, the credits are “nice to have” but no longer essential for the company to “generate profits and generate positive free cash flow.”
