As I have told you on the Car Pro Radio Show, automakers are looking for any way to cut costs so they can hold consumer prices down. This could be a huge help: The White House’s rollback of environmental rules is giving U.S. automakers a financial cushion as they grapple with steep costs from President Donald Trump’s tariffs, nudging companies to lean harder into their most profitable vehicles: large trucks and SUVs.
Rapid swings in trade and regulatory policy have forced automakers to rethink investment strategies, product planning and assembly decisions. The Detroit 3 estimate their combined tariff costs could reach $8 billion this year, despite significant U.S. manufacturing operations, with billions more expected in the months ahead. Companies are scrambling to limit losses, even as they remain under pressure to invest in advanced technologies that may not deliver profits for years.
Trump’s rollback of Biden-era electric vehicle policies is allowing automakers to prioritize gasoline-powered pickups and SUVs, which generate higher profits than smaller cars or EVs. The shift could help companies weather tariff-related losses while buying time to reshape their EV strategies.
The administration has also paused penalties for failing to meet federal fuel economy standards, eliminating the need to pay fines or buy environmental credits from EV manufacturers. That could mean substantial savings for legacy automakers. Tesla generated $2.8 billion in credit revenue last year, while Rivian has projected a $100 million shortfall because of the policy change.
Ford CEO Jim Farley said in a statement that the change lowered Ford’s carbon credit costs by nearly $1.5 billion, compared with an estimated $2 billion in tariff expenses. “Further changes will balance standards and customer choice and have the potential to unlock a multibillion-dollar opportunity over the next two years,” he said on a call with analysts.
General Motors and Stellantis are already pivoting toward gasoline-powered models. GM CEO Mary Barra pointed to new internal combustion engine production of the Chevrolet Equinox and Blazer at plants in Kansas and Tennessee, saying the company is “well positioned to succeed in an ICE market that has, now, a longer runway.” Stellantis, meanwhile, is reintroducing its Hemi-equipped Ram 1500 pickups and promoting its lineup of V-8 engines. CEO Antonio Filosa said the administration’s approach gives the company “more flexibility in choosing better margin-optimized mix in between ICE version and the electrified version of the models that we sell.” In other words, big trucks and SUVs make money-electric vehicles lose money.
The ability to sell higher-margin vehicles could partially offset tariff expenses, though analysts caution the relief will not erase the cost burden. “They’re trying to figure out how to balance everything out to account for changes that are now not only product-related but also policy-related,” said Edmunds analyst Jessica Caldwell.
Trump’s broader environmental agenda extends beyond CAFE penalties. His “One Big Beautiful Bill,” signed into law in July, phases out federal EV incentives and curtails the Environmental Protection Agency’s authority to regulate greenhouse gases. The elimination of federal tax credits, long used to encourage EV adoption, removes another lever automakers relied on as they made long-term product and investment decisions.
Even with more favorable rules at home, automakers are wrestling with the global impact of tariffs. Toyota expects tariffs to cost it $9.7 billion this year, a figure that could climb higher because of semiconductor levies. Volkswagen, which had bet heavily on EV adoption, now sees hybrids as key to expanding its U.S. market share.
Despite the policy shifts, automakers acknowledge they cannot ignore EV investment. Industry executives warn that slowing down too much risks ceding ground to Chinese manufacturers, who are pushing aggressively into global markets with lower-cost models. GM has reiterated that its long-term strategy is built on “profitable electric vehicle production,” which Barra called the company’s “North Star.” Ford is pushing forward with its new Universal EV Production System, which Farley described as “the most radical change” in how the company designs and builds vehicles since the Model T. The platform is expected to underpin a $30,000 electric pickup aimed at competing directly with Tesla and Chinese rivals. We brought you that story last week in this newsletter.
Analysts say the result is a delicate balancing act. Automakers must manage near-term costs and policy changes while keeping an eye on long-term competitiveness. Stephanie Brinley, associate director of AutoIntelligence at S&P Global Mobility, cautioned that automakers cannot ignore regulations entirely. While penalties have been paused, future administrations could reimpose them. “It’s highly unlikely a subsequent administration would go back and retroactively fine, but it’s not impossible,” she said.
For now, the path forward is clear: build what makes money, NOW. That means light trucks, crossovers and SUVs that appeal to U.S. buyers and deliver strong margins, even as tariffs cut into profits and EV sales slow.
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