Like it or not, almost every new development in the global automotive industry is dominated by the new Trump administration. What impact will its very different set of policies have on the world’s second-biggest car market? What happens with any new auto tariffs? And what does it mean for the still-emerging electric vehicle market, whose growth had been heavily driven by the Biden administration’s policies?
The dust is far from settled right now. But already, we know that more tariffs are coming and that policies promoting an eventual all-electric car market in the U.S. are in the crosshairs. And the next big battleground may be the state of California.
On this edition of Critical Materials, we’ll explore what that development means for all of us, and not just those who live in the Golden State. We’ll also dive into a concerning Tesla stock sell-off situation, and dig into some juicy new details about the dashed Honda-Nissan merger.
We’re on slightly more limited duty here at InsideEVs today as our U.S.-based staff is off for the Presidents’ Day holiday, but normal service will resume on Tuesday.
30%: Trump’s EPA VS. California
The U.S. Environmental Protection Agency was actually established by a Republican president, and one from California to boot—Richard Nixon. At the time, air pollution was strangling the country in countless ways and parts of California ostensibly had it the worst. Yet California has long had the power to set its own clean air and climate standards, and when it comes to cars, more than a dozen states have now adopted its stricter rules as well.
My point is, that’s a lot of cars. More new cars are sold in California each year than any other state, and when you add in all the others that follow its rules, you have automakers basically beholden to a tougher set of rules, whether they like it or not.
This “waiver,” as it’s called, has long been a target of the petroleum industry, political conservatives and even the auto industry at times—though not uniformly on the last one. That included the Trump administration’s first go-around. This time, its biggest target could be California’s decision to ban the sale of new internal combustion cars by 2035.
Here’s Bloomberg with more:
Environmental Protection Agency Administrator Lee Zeldin said on Feb. 14 he would formally subject the EPA’s approval of those California rules to congressional scrutiny, opening the door for lawmakers’ expedited repeal of the authorizations. The move responds to a clamor from carmakers, auto dealers and fuel producers calling California’s standards unachievable.
At issue are EPA decisions under former President Joe Biden to authorize three California car pollution regulations — including measures governing cars and heavy-duty engines. Those EPA waivers that allowed California to preempt federal standards will now be submitted to Congress for review, a shift from the approach under Biden.
The move empowers congressional Republicans to swiftly repeal the standards using expedited procedures under a law known as the Congressional Review Act. Doing so could effectively wipe away California’s Clean Cars II program mandating zero-emission vehicles, ultimately banning the sale of conventional, gasoline-powered cars in 2035.
“We will submit it to Congress,” Zeldin said alongside President Donald Trump in the White House on Feb. 14. “The Congress will have the opportunity, through the Congressional Review Act, to make that waiver go away. We will do everything in our part to help the American people to make life in America more affordable.”
Not all states that follow California’s emissions rules are planning to ban new gas cars but 2035, but most are. Those states include Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Washington and others.
Basically, the Trump administration thinks that if it hits back at California’s environmental authority here, it can kill a lot of birds with one stone. And the implications would go well beyond that one state—if not mandated to end gas car sales, automakers may continue to slow-walk their EV development, as we’ve seen most of them do so far.
But to EPA Chief Lee Zeldin’s claim about affordability: the only things that will bring down EV costs are new battery technology developments and manufacturing scale. Any new technology starts out expensive and gets cheaper over time. EVs are no different. In thwarting these rules, there’s no guarantee that gas cars will get cheaper over time, and certainly none that alternatives to gas-powered cars—you might even call that “consumer choice”—will either.
At the same time, when you look at the rate of EV growth slowing down when compared to the auto industry’s once-rosy projections, a total ban on gas cars in just 10 years may have been punted down the road by market forces alone. But the future is hard to predict, and above all, the auto industry says it wants certainty on what to and what rules to play by.
60%: Tesla’s Stock Sell-Off Continues
Photo by: InsideEVs/Andrei Nedelea
We generally don’t cover Tesla based on its stock price like other publications do (and I’d add that probably nothing I write should be taken as financial advice.) But the automaker being valued at more than the next dozen or so car companies put together is an important part of its story, and why so many other companies are chasing its progress. And it’s why Tesla’s chief executive is the wealthiest man in the world.
Yet that stock price may be showing some cracks as of late. Despite a post-election glow-up where investors beamed about the possibility that CEO Elon Musk’s close relationship with Trump would give Tesla a unique edge, $TSLA has dropped 10% in the past month alone.
Forbes points out that some high-profile figures on Tesla’s board have unloaded their stock in recent weeks, including Chairwoman Robyn Denholm and Musk’s brother, entrepreneur Kimbal Musk. The latter Musk sold almost $30 million of shares in a single day this month and Denholm just got rid of another $48 million.
What does it mean? Here’s Forbes with some speculation:
“Board directors get paid in stock and it’s really scary to have your entire net worth in one company’s assets. So it’s perfectly understandable that executives and directors would sell some stock when they can,” said UCLA professor Andrew Verstein, co-director of its Lowell Milken Institute for Business Law and Policy. “On the other hand, it’s a little bit scary because they know how the company is going to do, and if they’re selling that could be a bad sign.”
Tesla board members, including Musk’s brother Kimbal, who holds 1.46 million shares, and James Murdoch, have been big financial winners as the stock’s value has surged, especially since the company became highly profitable in 2020 when its Shanghai Gigafactory opened. However, that adds to concerns that they’ve failed in recent years to moderate CEO Musk’s increasingly polarizing comments and actions that threaten the Tesla brand. That’s become an even bigger issue now that he’s leading DOGE, the so-called Department of Governmental Efficiency, for President Donald Trump, and attempting to make major federal budget cuts despite concerns about the legality of that effort.
It’s hard to parse what this means, exactly. It could well be business as usual, or board members and Tesla insiders bracing for some bad news. After all, Musk’s role in the government is a deeply polarizing one, and we won’t know until the first quarter ends (and we’ll probably get a clearer picture in the second) what his activities as of late will have on Tesla sales.
90%: Who Said This Was An ‘Equal Merger’?
Photo by: Nissan
Honda Nissan Mitsubishi Partnership
We now know that the planned $60 billion merger between Honda and Nissan is officially off the table, leaving Nissan looking for a new partner while facing a very uncertain future and Honda probably breathing a sigh of relief.
We also know that the deal didn’t go down in part because Nissan, despite its financial turmoil, balked at being the rescue-ee and some junior subsidiary in a deal where it expected to be treated as an equal. Yet a story in Nikkei Asia shows exactly how Honda viewed Nissan:
Nissan Motor executives expressed astonishment and outrage when Honda Motor proposed “Honda Corporation” as the name for the holding company under which the two automakers were to integrate operations. But Honda’s executives dismissed such concerns, noting their belief that the tie-up was not supposed to be an equal merger.
Nikkei’s look into the behind-the-scenes details of negotiations between the two Japanese automakers sheds new light on how plans for this proposed historic merger collapsed after just one month.
This difference in visions toward the integration was already evident at a press conference on Dec. 23, when the two companies announced plans to set up a joint holding company. According to a joint statement, Honda was to nominate the holding company’s president as well as a majority of both internal and external directors. It was clear that Honda was leading the negotiations.
The merged company was due to be called “Honda Corporation.” Let that one sink in.
100%: When Will We Realistically See A Total Ban On New Gas Cars?
Photo by: John Voelcker
Ionna Rechargery: Apex, North Carolina
I say this as the editor of an EV news publication: I’m not entirely convinced that the 2035 target is achievable, either. But it gave automakers and charging infrastructure providers something aggressive to aim for. Then again, maybe battery advancements would’ve gotten EVs cheap enough to be truly viable for all in a decade, at least in some U.S. states or other countries. Norway has pretty much pulled this off already.
What do you think is a more “realistic” target for markets like the U.S., or Germany, or other places? Sound off in the comments.
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