General Motors (GM) and Ford are poised for record-breaking performance this year. These American automakers are reaping substantial benefits from the Donald Trump administration’s anti-environmental policies, including the September 2023 elimination of electric vehicle (EV) subsidies and the recent scrapping of the endangerment finding, which was the foundation for greenhouse gas regulations.
Profitability is improving as sales shift from expensive, low-margin eco-friendly vehicles like electric cars and hybrids to more affordable, high-margin internal combustion engine vehicles. However, this trend is likely to further erode the U.S. auto industry’s already lagging competitiveness in electrification.
Trump’s Anti-Environmental Policies Give Wings to High-Displacement, Internal Combustion U.S. Automakers
According to industry reports on Thursday, Ford projects its adjusted earnings before interest and taxes (EBIT) will reach 10 billion USD this year, a 47% increase from last year’s 6.8 billion USD. This forecast signals a return to the robust EBIT levels seen from 2021 to 2024, when it consistently exceeded 10 billion USD annually.
GM has set an even more ambitious EBIT target of 15 billion USD for this year, an 18% jump from last year’s 12.7 billion USD. If achieved, this would surpass GM’s record-breaking EBIT of 14.9 billion USD set in 2024.
The optimism behind these projections stems from the Trump administration’s blatant favoritism towards internal combustion engines. Earlier this month, President Trump eliminated the endangerment finding, which had been the cornerstone of greenhouse gas regulations since its introduction during the Barack Obama administration in 2009. This finding had officially recognized six greenhouse gases, including carbon dioxide, methane, and nitrous oxide, as threats to public health.
Under the previous regulatory framework, U.S. automakers were required to gradually increase their sales of eco-friendly vehicles, such as electric cars and hybrids, to offset emissions from less efficient internal combustion engine vehicles. Failure to meet these requirements resulted in hefty fines or the need to purchase regulatory credits from electric vehicle manufacturers like Tesla. GM reportedly spent a staggering 3.5 billion USD on such credits over the past three years.
Profit at the Cost of the Future’ Weakening EV Edge May Shrink Global Market
The Trump administration’s elimination of the endangerment finding has effectively removed the basis for greenhouse gas regulations. This policy shift allows GM and Ford to boost sales of their more profitable internal combustion engine vehicles in the U.S. market without incurring massive regulatory costs or fines. This development plays to the traditional strengths of American automakers, particularly in the high-displacement vehicle segment, including popular pickup trucks.
Mary Barra, Chief Executive Officer (CEO) of GM, expressed optimism in a recent letter to shareholders, predicting a gradual easing of the U.S. regulatory environment and robust growth in the domestic new car market. Similarly, Ford CEO Jim Farley, speaking at last month’s Detroit Auto Show, highlighted improving profitability and expressed high expectations for this year’s financial results.
However, industry experts warn that the strategic shift in production and sales, prompted by the changing U.S. regulatory landscape, could further weaken American automakers’ competitiveness in electrification. This setback is particularly concerning as the global EV market continues to expand, potentially leading to a decline in U.S. automakers’ global market share.
Market research firm SNE Research reports that global EV (BEV+PHEV) sales reached 21.47 million units last year, marking a 21.5% increase from the previous year. While the U.S. market contracted by 5%, China and Europe posted impressive growth rates of 18.8% and 34.9%, respectively.
In response to these trends, GM and Ford are planning to increase hybrid vehicle sales in the U.S. market as part of their mid- to long-term electrification strategies. However, industry observers predict this will be challenging due to strong competition from Toyota, Honda, Hyundai, and Kia. According to S&P Global, as of last August, Toyota led the U.S. hybrid market with a 48.4% share, followed by Honda at 18.6%, and Hyundai and Kia combined at 13.0%. Ford managed only a 7.9% market share, ranking fourth, while GM failed to crack the top ten.
