Automakers Caught Between What Trump Wants and California's EV Demands

A legal battle between the Trump administration and the state of California over vehicle emissions policy is about to get hot—the consequences could reshape the U.S. auto market and the economics of electric vehicles.

At issue is California’s long-standing authority to set its own vehicle-emissions standards under a federal waiver granted by the Environmental Protection Agency. For decades, administrations of both parties have approved those waivers, allowing the state to impose stricter pollution rules than federal law requires. Eleven other states, representing roughly 29 percent of U.S. new-vehicle sales according to S&P Global Mobility, follow California’s framework.

That arrangement is now under threat. Congressional Republicans moved to nullify California’s latest waiver using the Congressional Review Act, a mechanism typically used to overturn recently adopted federal regulations. President Donald Trump signed the measure in June. California filed suit the same day, arguing that Congress and the EPA improperly reclassified its waiver as a “rule” subject to reversal under the act.

According to Reuters, the case is scheduled for a hearing in federal court in Oakland, where the administration has moved to dismiss the lawsuit. California contends that a waiver is a case-specific determination, not a broad regulatory rule, and therefore falls outside the scope of the Congressional Review Act. The Government Accountability Office reached a similar conclusion last March, stating that such waivers are not rules because they do not represent a general application of policy. Congressional Republicans have countered that Congress retains authority to determine what qualifies as a rule under the statute.

State and federal policies are now moving in opposite directions. California has adopted regulations that would require all new passenger vehicles sold in the state to be zero-emission by 2035, with escalating targets beginning this year. The Trump administration has dismantled key elements of federal EV support.

Lawmakers eliminated the $7,500 federal EV tax credit and removed penalties for automakers that fail to meet fuel-economy standards. The EPA also recently overturned an Obama-era finding that greenhouse gas emissions endanger public health, a determination that formed the legal foundation for federal vehicle emissions rules first implemented in 2010.

If California wins, automakers could find themselves navigating two conflicting regulatory regimes within the same country. They would need to continue developing and selling increasing volumes of zero-emission vehicles in California and aligned states while operating under looser federal requirements elsewhere.

If the administration succeeds in ending the waiver, traditional automakers would face less regulatory pressure to accelerate EV sales in California and other adopting states. For Tesla and other electric-only manufacturers, the stakes are different. A portion of their revenue comes from selling regulatory credits to competitors that need them to meet emissions requirements. Weakening California’s authority could reduce demand for those credits.

California’s Air Resources Board has told manufacturers they may choose whether to comply with the state’s new standards for now, but warned that penalties could follow if the state ultimately wins in court. Many automakers appear to be proceeding cautiously, continuing EV development while avoiding abrupt shifts in product strategy.

California’s authority to regulate vehicle emissions dates back to the 1960s, when severe smog in Los Angeles prompted state officials to adopt stricter standards. Congress codified that authority in the Air Quality Act of 1967, granting the EPA the ability to issue waivers recognizing California’s unique air-quality challenges. Since then, more than 100 waivers have been approved.

This article was co-written using AI and was then heavily edited and optimized by our editorial team.

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