Beaten-down carmakers smell fatter profits under Trump
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Illustration: Eniola Odetunde/Axios
For all their complaints about how unfair President Trump's tariffs are for U.S. automakers, the industry seems quite pleased with his environmental policies, which lift a massive regulatory cost burden.
Why it matters: Trump's agenda could wind up as a net win for the auto industry, allowing them to sell more high-margin, U.S.-built trucks and SUVs for the foreseeable future, while avoiding penalties for not building enough electric vehicles.
Stunning stat: Together, General Motors, Ford and Stellantis are projecting nearly $10 billion in gross tariff costs this year.
- For the most part, they're eating those taxes rather than passing them on to consumers.
Yes, but: Trump's deregulation policies could help them offset most or all of that burden, depending on the outcome of continuing trade talks.
Driving the news: In quarterly earnings calls with analysts, the CEOs of the Detroit 3 said Trump's reversal of Biden-era EV policies will boost their finances.
- "To build what customers really want is going to be a tailwind for us," said Ford CEO Jim Farley, citing what he called a "multi-billion dollar opportunity" over the next couple of years.
- GM CEO Mary Barra had a similar message, calling Trump's regulatory policies a "huge opportunity" that allow the automaker to keep selling profitable trucks and SUVs while EV demand slowly builds.
- Stellantis, meanwhile, is bringing back muscle cars and Hemi engines now that it's no longer obliged to produce EVs and fuel-sipping engines. "And this will mean to us a lot of additional profit," said CEO Antonio Filosa, trying to steer a turnaround.
The big picture: The Trump administration has been moving quickly to unwind Biden's EV-favorable policies.
- Trump ditched his predecessor's ambitious CO2 emissions targets and canceled California's EV mandates (although 11 states are suing to block that effort).
- His administration is also erasing consumer tax credits for EV purchases and repealing existing fuel economy targets and CO2 emissions standards.
- By removing penalties for non-compliance, the government is also eliminating any incentive for carmakers to buy regulatory credits from overachieving rivals.
Zoom in: Ford, for example, said last year it had contracts to purchase about $3.8 billion of non-compliance credits from other carmakers — presumably Tesla, which said in October that it had long-term contracts to sell $4.7 billion of credits.
- As of this week, however, Farley told analysts that Ford has already reduced that commitment by nearly $1.5 billion — money that can instead be invested in other parts of the business or to improve profits.
On the flip side, Telsa is staring down a "few rough quarters" as support for EVs goes away and it pivots toward autonomy and robots starting next year.
- Aside from vanishing tax breaks that will likely dampen EV demand, Tesla is also losing that easy money — $15 billion since 2012 — it made from selling regulatory credits.
What to watch: While the Detroit 3 welcome the relief from regulatory pressures, they're still anxious to see how Trump will revamp the existing trade agreement between the U.S., Mexico and Canada on which they depend.
