Analysis of the Impact of the Trump Administration's Automotive Policy Changes on the Competitive Landscape of the U.S. Auto Industry

Based on the latest policy developments, market data, and corporate financial information, I will provide you with a systematic and comprehensive analysis report.

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Since taking office in early 2025, the Trump Administration has rapidly promoted deregulatory policies for the auto industry. In December 2025, the White House and the Department of Transportation jointly announced a proposal to revoke the tightened vehicle fuel efficiency standards introduced in 2024, which is expected to be formally finalized in early 2026[1][2]. Meanwhile, Environmental Protection Agency (EPA) Administrator Lee Zeldin announced that the agency is working to repeal the 2009 “Endangerment Finding,” which served as the legal basis for multiple climate regulations during the Biden Administration[2][3].

Regarding the Corporate Average Fuel Economy (CAFE) standards, the Trump Administration reset the standards in the summer of 2025, overturning the ambitious fuel economy targets set during the Biden Administration. By lowering the baseline, regulators have ensured that automakers can continue to produce gasoline and diesel vehicles without facing penalties for failing to meet stricter efficiency thresholds[1]. This policy shift marks a fundamental transformation of the U.S. auto industry from a regulation-driven electrification transition to market-driven development.

The federal electric vehicle tax credit expired on September 30, 2025, meaning consumers purchasing new electric vehicles will no longer be eligible for the maximum $7,500 federal tax credit[4]. Meanwhile, the European Union also revoked its 2025 electric vehicle mandate at the end of 2025, delivering a “Christmas gift” to German automakers[4]. This trend of coordinated policy relaxation has further exacerbated downward pressure on global electric vehicle demand.

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Detroit’s three major traditional automakers—Ford, General Motors, and Stellantis—are facing unprecedented pressure to make strategic decisions.

has adopted the most radical strategic shift. Company CEO Jim Farley publicly acknowledged that “policy, not consumer demand, is driving the electrification process”[4]. Ford’s specific adjustments include: canceling the next-generation large electric truck program and shifting to smaller, more affordable electric vehicles; refocusing on hybrid models (including plug-in hybrids rather than pure electric vehicles); rebalancing investment in core products such as trucks and SUVs. The company expects to record $19.5 billion in strategic adjustment charges, reflecting a massive write-down of previous electrification investments[4][5].

has adopted a more prudent strategy. The company has invested $4 billion to retool factories for the production of hybrid and fuel-powered models, while retaining some electric vehicle development projects. General Motors is still advancing projects such as the 2027 Chevrolet Bolt electric vehicle (starting at $35,000) and the Cadillac Celestiq electric vehicle (priced at over $300,000)[4]. The company recorded $1.6 billion in charges in the fourth quarter of 2025, including $1.2 billion in non-cash charges for electric vehicle capacity adjustments and $400 million for contract cancellations and electric vehicle investments[4].

faces the most severe challenges. New CEO Antonio Filosa has overseen a series of radical adjustments: converting the originally all-electric Dodge Charger to be compatible with fuel engines; discontinuing the Ram electric pickup; delaying the Ramcharger EREV until 2026; and reviving the discontinued Hemi V8 engine[4]. The company has committed $13 billion to fuel vehicle production in the U.S. market (including 5 new models), while retaining more electric vehicle options in the European market[4].

presents a unique situation of both competitive advantages and challenges amid this policy change. CEO Elon Musk’s personal political ties with President Trump have become a unique strategic asset for the company[5]. This political connection has brought substantial policy dividends: a more relaxed regulatory environment for autonomous driving, protective measures against foreign competitors, and manufacturing-friendly federal policy support[5].

However, policy changes have also had complex impacts on Tesla. The expiration of tax credits has directly pressured sales of the Model 3 and Model Y, which relied on government incentives. BloombergNEF forecasts that global electric vehicle growth will be only 12% in 2026, a significant downward revision from previous expectations[5]. Investors are shifting Tesla’s valuation logic from that of a traditional automaker to an AI and robotics technology company, with the potential earnings from its Full Self-Driving (FSD) subscription model and robotaxi services becoming key pillars of its valuation[5].

such as Rivian are facing even more severe survival pressures. Weakened policy support coupled with rising capital costs have dealt a double blow to these unprofitable enterprises.

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In terms of stock performance, traditional automakers have achieved significant excess returns following the policy changes. Data as of January 16, 2026, shows:

Metric	Ford (F)	General Motors (GM)	Stellantis (STLA)
Market Capitalization	$53.3 Billion	$75.4 Billion	$27.7 Billion
Current Stock Price	$13.60	$80.82	$9.60
Price-to-Earnings Ratio (P/E)	11.52x	25.56x	2.88x
Price-to-Book Ratio (P/B)	1.14x	1.17x	0.67x
Return on Equity (ROE)	10.35%	4.68%	26.27%
Net Profit Margin	2.48%	1.66%	9.35%
1-Year Stock Performance	+33.67%	+58.56%	-25.47%
6-Month Stock Performance	+22.04%	+51.89%	+2.02%

General Motors has delivered the most impressive performance, with its stock price rising 58.56% in one year and 51.89% in six months, significantly outperforming the broader market[0]. This is mainly due to its robust profitability and flexible strategic adjustment—neither completely abandoning electrification nor actively deploying hybrid models. Ford’s stock performance is also solid, rising 33.67% in one year, reflecting market recognition of its strategic shift[0]. However, Stellantis is facing greater difficulties, with its stock price falling 25.47% in one year, reflecting market concerns about its execution capabilities and market share loss[0].

From a valuation perspective, traditional automakers are generally at historically low levels. Ford’s price-to-earnings ratio is only 11.52x, and Stellantis’s is even lower at 2.88x, providing value investors with a relatively ample margin of safety[0]. However, investors need to be wary that this low valuation reflects, to a certain extent, market doubts about the long-term electrification transformation capabilities of traditional automakers.

Tesla’s valuation logic is undergoing a fundamental transformation. The company currently has a market capitalization of $145.5 billion and a price-to-earnings ratio of 268x, far exceeding that of traditional automakers[0]. This valuation premium is mainly based on the following expectations:

1. AI and Autonomous Driving Technology
   : Investors have assigned significant weight to the potential market value of Tesla’s Full Self-Driving (FSD) system and robotaxi services[5]. The market is increasingly viewing Tesla as an AI/technology company rather than a traditional automaker.

2. Expansion of Energy Business
   : In the third quarter of 2025, revenue from energy generation and storage reached $3.42 billion, accounting for 12.2% of total revenue[0], showing positive progress in business diversification.

3. Humanoid Robot Optimus
   : Although still in the early stages, this concept provides investors with imaginative space for a long-term growth narrative.

However, the short-term pressures facing Tesla cannot be ignored:

• The expiration of tax credits has directly impacted sales
• Intensifying competition in the Chinese market continues to bring price pressure
• Frequent personnel changes and policy uncertainty bring operational risks

From a technical analysis perspective, Tesla’s stock price is currently in a range-bound pattern. The MACD indicator shows a death cross signal, the KDJ indicator is neutral to weak, and the stock price is trading within the range of $430-$455[0]. The beta coefficient is 1.83, indicating that its volatility is significantly higher than the broader market[0].

The current U.S. auto industry is undergoing a fundamental transformation from “policy-driven growth” to “market demand-driven competition.” Investors should focus on the following core investment themes:

Against the backdrop of slowed pure electrification progress, the value of hybrid models as a transitional solution is being re-recognized. Both Ford and General Motors have increased their investment in hybrid models, a strategy that can not only reduce compliance costs but also meet consumers’ demand for improved fuel efficiency[4].

The 25% auto import tariff implemented by the Trump Administration is reshaping the global auto supply chain. 79% of Ford’s vehicles sold in the U.S. are assembled domestically, giving it a clear advantage over General Motors’ 53% localization rate[6]. This supply chain restructuring will bring cost advantages to automakers with local manufacturing capabilities.

Policy relaxation provides greater experimental space for technological innovation. Tesla’s autonomous driving technology, and the solid-state battery research and development by Hyundai and Toyota will become key battlefields for competition in the next stage. Enterprises that can accelerate technological accumulation in a relaxed regulatory environment will gain long-term competitive advantages.

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1. Risk of Lagging Electrification Transformation
   : Overfocus on short-term fuel vehicle profits may cause them to miss the strategic window for electrification transformation. When policy winds shift again or consumer preferences accelerate toward electrification, these enterprises may face a dilemma of insufficient technological accumulation.

2. Uncertainty in Compliance Costs
   : Although current emission regulations have been relaxed, the EPA is still advancing the legal process of revoking the “Endangerment Finding,” and the final result remains uncertain. If policy reverses, enterprises may face significant fluctuations in compliance costs[2].

3. Risk of Market Share Loss
   : In the electric vehicle market, the continuous expansion of Tesla and Chinese brands will pose long-term pressure on traditional automakers. Especially in the high-end electric vehicle segment, the brand premium capability of traditional automakers is facing tests.

1. Risk of Slowing Demand Growth
   : Global electric vehicle demand growth is significantly lower than expected, with BloombergNEF revising its 2026 growth forecast down to 12%[5]. Weak demand will directly impact enterprises’ revenue and profitability.

2. Risk of Valuation Correction
   : The high valuations of electric vehicle enterprises such as Tesla are based on high growth expectations. If the development of new businesses such as AI and robotaxi falls short of expectations, stock prices may face significant corrections.

3. Risk of Policy Dependence
   : Although the current policy environment is favorable to traditional automakers, if policy winds shift again in the future, electric vehicle enterprises may regain competitive advantages.

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For investors seeking value investment opportunities, traditional automakers currently provide a relatively ample valuation margin of safety:

• General Motors (GM)
  : The analyst consensus rating is “Buy,” with a target price of $88.00, representing an 8.9% upside from the current stock price[0]. The company has robust profitability, with third-quarter earnings per share exceeding expectations by 22%, demonstrating strong operational efficiency.

• Ford Motor Company (F)
  : The analyst consensus rating is “Hold.” Although facing short-term pressure from strategic adjustment charges, the company’s brand advantages in the North American market and its truck/SUV product portfolio provide a stable cash flow foundation[0].

• Stellantis
  : The current valuation is highly attractive (P/E of only 2.88x, P/B of only 0.67x). However, considering its difficulties in the U.S. market and execution risks, it is recommended that investors remain cautious and wait for signals of management stability and clear strategic execution[0].

For growth investors with higher risk tolerance, Tesla remains a worthy target to watch:

• Core Logic
  : Tesla’s valuation logic has shifted from that of a traditional automaker to an “AI technology company.” Investors need to accept its high valuation and focus on the long-term development of its AI, robotaxi, and energy businesses[5].

• Key Catalyst
  : The fourth-quarter earnings report to be released on January 28, 2026, will be an important observation window. Analysts expect earnings per share of $0.44 and revenue of $24.76 billion[0].

• Risk Warning
  : The current valuation level is highly sensitive to any negative news. Investors should set strict stop-loss disciplines and pay attention to regulatory risks that may arise from Musk’s political ties[5].

Based on the above analysis, we recommend that investors adopt the following allocation strategy:

1. Core Allocation (60%)
   : Traditional automakers with robust profitability and flexible strategies, such as General Motors and Ford, providing valuation protection and dividend income.

2. Satellite Allocation (25%)
   : Growth exposure to electric vehicle manufacturers such as Tesla, focusing on the long-term development potential of their AI businesses.

3. Risk Hedging (15%)
   : Hold cash or allocate to more defensive sectors to cope with market volatility that may be caused by policy uncertainty.

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The Trump Administration’s measures to roll back emission regulations and dilute electric vehicle policies are profoundly reshaping the competitive landscape of the U.S. auto industry. This policy change has had differentiated investment impacts on traditional automakers and electric vehicle manufacturers:

have gained short-term policy dividends—reduced compliance costs, expanded profit margins for fuel vehicle businesses, and stock price valuation repair. However, in the medium to long term, over-reliance on policy arbitrage may weaken their motivation and ability for electrification transformation.

has gained a unique competitive advantage through its political ties with the Trump Administration, but at the same time faces risks of policy dependence and pressure for valuation correction. The company is actively building the narrative of an “AI technology company,” but its long-term value still highly depends on the development of new businesses such as autonomous driving, energy, and robotics.

From an investment perspective, the current U.S. auto industry is at a critical turning point. Investors need to weigh short-term policy dividends against long-term structural changes and select appropriate allocation strategies based on their own risk preferences and investment objectives. Regardless of policy changes, enterprises that can maintain leadership in technological innovation, cost control, and adaptation to market demand changes will ultimately win this industry reshaping.

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[1] Nonprofit Quarterly - “Environmental Advocates Confront Trump’s Fossil Fuel Agenda” (January 16, 2026) https://nonprofitquarterly.org/environmental-advocates-confront-trumps-fossil-fuel-agenda/

[2] C&EN - “EPA plans more environmental deregulation in 2026” (January 2026) https://cen.acs.org/environment/epa-deregulation-zeldin-climate-endangerment-vehicle-emission-rules/104/web/2026/01

[3] Eos.org - “The State of the Science 1 Year On: Climate Change and Energy” (January 15, 2026) https://eos.org/report/the-state-of-the-science-1-year-on-climate-change-and-energy

[4] Yahoo Finance - “2025: The year the Big 3 backed away from EVs” (December 2025) https://finance.yahoo.com/news/2025-the-year-the-big-3-backed-away-from-evs-142434253.html

[5] AInvest - “Assessing the Link Between Elon Musk’s Political Influence and the U.S. EV Rollback” (January 16, 2026) https://www.ainvest.com/news/assessing-link-elon-musk-political-influence-ev-rollback-2601/

[6] Digital Dealer - “U.S. Tariff Tracker: Impact and Automaker Response” (January 2026) https://digitaldealer.com/news/us-tariff-tracker-impact-automaker-response/164521/

[0] Jinling AI Financial Database - Market data, stock price information, financial indicators, technical analysis