Automaker Stocks Climb on Prospect of Eased US Fuel-Economy Rules
Stellantis, GM, and Ford shares gain as investors bet on a potential rollback of stringent emissions standards that would slash future compliance costs.
Shares in major global automakers surged Tuesday following reports that former President Donald Trump plans to significantly relax vehicle fuel-economy standards if elected, a move that could unwind the Biden administration's aggressive push toward electric vehicles.
Investors reacted swiftly to the prospect of lighter regulatory burdens, which could save the industry billions in future capital expenditures and compliance costs. Stellantis (STLA) was a standout performer, with its shares closing up 4.66% at $11.46. Other legacy automakers also saw gains, as General Motors (GM) rose 1.40% to $74.69 and Ford (F) added 1.00% to finish the session at $13.09.
The rally was triggered by reports outlining a potential Trump administration's plan to roll back the current Corporate Average Fuel Economy (CAFE) standards. The Biden administration had finalized rules pushing for an industry-wide average of approximately 50 miles per gallon by 2031. A new proposal would reportedly lower that target to around 34.5 MPG, a level closer to standards from the previous Trump administration, according to reporting from Livemint.
For traditional car companies, which are spending heavily to develop EVs while still generating the bulk of their profits from gasoline-powered trucks and SUVs, such a policy shift represents a significant financial tailwind. Analysts suggest that easing these requirements would allow manufacturers to allocate more capital toward their profitable internal combustion engine (ICE) vehicle lineups and slow the pace of their costly transition to electric models.
"This policy creates a 'regulatory tailwind' for traditional automakers," noted a report from AInvest, highlighting the potential for improved margins. European automakers with substantial U.S. sales, including Volkswagen and BMW, also saw their shares climb between 2.5% and 5% on the news.
However, the potential policy reversal poses a threat to electric-vehicle pure-plays like Tesla and Rivian. Part of the current regulatory framework allows EV manufacturers to sell emissions credits to traditional automakers that fail to meet their fleet-wide targets. These credit sales have historically been a lucrative source of high-margin revenue. A rollback of the standards would diminish the demand for these credits, potentially impacting profitability for EV-centric companies.
Investing.com noted that the elimination of robust credit trading could create a significant revenue gap for some of the newer EV players who have relied on them. The diverging stock performance between legacy automakers and some EV names on Tuesday underscores the market's view of the clear winners and losers under such a regulatory shift.
The development places the automotive sector at a crossroads, with its future trajectory in the critical U.S. market closely tied to the upcoming presidential election. While the industry remains committed to an electric future long-term, the pace of that transition—and the profitability of its legacy business—is now a central focus for investors.