The Trump administration has decided that America needs a breather from fuel economy regulations—you know, those innovation-through-necessity measures that have saved U.S. consumers an estimated $5 trillion at the pump over the years.
Now automakers—the same ones who just spent billions on labor, tooling, R&D and lobbying for electric vehicles—face a cocktail of uncertainty that tastes eerily similar to the federal pullback on EV subsidies.
Welcome back to Critical Materials, your daily roundup for all things electric and tech in the automotive space. Also on deck: car companies are pursuing side-hustles at a surprising rate and Waymo heads to Philly. Let’s jump in.
30%: Brace For Fuel Economy Whiplash
Trump Announcement White House
Photo by: White House
In the eyes of an automaker executive, the pullback on fuel economy standards might seem like a win at first. Less-strict standards mean no longer needing to squeeze every last mile per gallon from the cylinder walls like blood from a stone, and in theory, that means cheaper new cars. But it’s not that simple.
After all, budgets are tight in 2025. And transportation? That’s the second-highest expense for the typical American household. Sure, you might save up to $900 on the upfront cost of a car without all of those pesky extra costs (if an automaker decides to pass on those savings), but how many miles before the increased cost of fuel consumption outweighs the upfront savings?
Jessica Caldwell, head of insights at Edmunds, explains why the policy shift doesn’t mean consumers will save money any time soon:
Today’s announcement was presented as a way to ease pricing pressures for consumers, but meaningful financial relief is unlikely to happen overnight. Product plans can take years to shift, and with the possibility of future policy reversals from new administrations, the regulatory landscape remains stop-and-start. These fluctuations also intersect with uncertainty surrounding long-term support for transportation infrastructure like EV charging, which shapes consumer confidence in adopting EV technology.
Edmunds data shows that new-vehicle prices remain roughly 30 percent higher than before the pandemic, and while looser standards may enable lower-cost, lower-efficiency vehicles, higher fuel costs over time could also offset those upfront savings.
What’s worse is that the seemingly spontaneous shift means that automakers are likely low-key freaking out behind the scenes.
This is yet another change in the way manufacturers do business in a key global market. It represents an abrupt change in policy that creates fear, uncertainty and doubt (the real villainous trio in this story) that could crush long-term earnings.
Industry trade group CALSTART shares its concerns:
When combined with other recent regulatory changes being proposed at the federal level, this proposal compounds a significant shift in direction to which the industry will need to adjust at incredibly short notice, creating uncertainty and undermining investor confidence.
Although relief might not be immediate for consumers, automakers could see some short-term financial breathing room. Manufacturers have been absorbing tariff-related costs on the back of investing heavily in electrification and autonomous technologies. Easing these requirements helps at the margins, but it is unlikely to dramatically alter the broader commitments they have already made, especially since automakers remain cautious about making major strategic shifts that could be upended if a future administration reinstates stronger CAFE standards.
CALSTART goes on to warn that this act could also upend economic growth of domestic automakers by placing them in a sense of regulatory complacency. As Europe and China continue to innovate, American manufacturers could easily begin to stall out as they have less incentive to be technologically competitive.
Furthermore, these same companies have already demonstrated the ability to meet current fuel economy standards.
Edmunds echoes the warning:
Globally, Europe, China, and other major markets continue to move forward with tighter efficiency rules and accelerated EV adoption. As U.S. standards shift, the domestic market may develop differently than other regions, which could influence the pace at which newer technologies or vehicle options become available to American consumers.
The plus side is that automakers likely know better by now that to just do an abrupt U-turn because of a policy shift. Between tariffs and tax credit woes, these companies have quickly realized that turning away from something that they’ve sunk so much cost into isn’t exactly a smart financial move.
General Motors’ Mary Barra has already said that the brand plans to continue building fuel-efficient motors. But whether that’s out of convenience, necessity or uncertainty is the real question
60%: Car Companies Need Side-Hustles As The Going Gets Tough
Photo by: InsideEVs
For more than a century, being an automaker meant one thing: you build cars. In 2025, where EV demand is zigzagging and regulation wobbles depending on the way the wind blows, having just one skill isn’t going to cut it anymore—that’s why car companies are picking up some side hustles.
No, they’re not slinging candles on Etsy or delivering DoorDash, but these auto-adjacent business units have quickly become a way to pad pockets with non-automotive revenue streams. And the reigning champ is (unsurprisingly) Tesla.
Tesla’s big hustle is the sale of regulatory credits that have totaled more than $11 billion over the years. Granted, there’s an end coming to those profits, but it would be insane not to mention since it’s essentially pure profit from an intangible regulatory permission slip.
But where regulatory credits end, more universal methods of income come into play thanks to software and subscriptions. Bloomberg reports:
Automakers have developed an infatuation with garnering a greater share of their income from subscription services rather than selling vehicles. It’s a delicate balance to strike as consumers have varying ideas of what’s worthy of a separate subscription price tag. These preferences can be dramatically different by region and can also change over time.
There’s a twist, though. People don’t hate the features that subscriptions bring them. They have been told that the hardware exists in their car but are paywalled and held hostage over a few bucks per month.
The report continues:
BMW famously attempted to charge a $180 annual subscription fee for heated seats, a move that was widely derided. Mercedes faced a lesser degree of backlash for proposing a $1,200 annual subscription for quicker acceleration. It isn’t that consumers don’t want these features, but that they feel they should be included for free.
Consumer preference surveys seem to indicate that consumers in China are placing a high level of importance on features such as advanced driver-assistance systems and enhanced acceleration. These features are in lower demand in the US and Europe, but still play a role in vehicle buying decisions.
Consumer preferences also wildly vary, with China preferring smart driving, Europe looking for more eco-friendly reasons to buy and the U.S. putting safety ahead of all.
When you are able to sell the why, it becomes incredibly easy to charge for it—well, as long as a competitor isn’t giving away the feature for free. If subscriptions for features weren’t enough, don’t forget the age-old subscription that comes in the form of auto insurance. Brands have begun rolling out data-driven policies that assess risk directly on the driving behavior of the people behind the wheel. And with smart business decisions being made on calculated risks, there’s no smarter way to assess that then to have direct access to the data about how someone drives.
Don’t forget energy storage. Brands like Tesla, GM and Hyundai have all taken hold on whole-home and commercial energy backup systems using the very same cells that would otherwise end up in an EV. With BEV sales entering a slowdown for the foreseeable future, it’s a smart way to use excess battery capacity, too.
Finally, robots. Actual humanoid robots that look and walk like real people. These are still in the infancy stage, but automakers are quickly graduating from Honda Asimo to Tesla Optimus-levels of human-like behavior. It’s kind of cool to see, but also scary in the Westworld kind of way.
Lots of options, folks. 2025 is the time to be an automaker because, as many brands are actively proving, building a car is just as easy as selling a bridge (with enough money and opportunity).
90%: Waymo’s Philly Operation Goes Hands-Off
Photo by: Waymo
There are cities to soft-launch your autonomous robotaxi in, and then there’s…well, Philly. Some may call it the City of Brotherly Love, but as locals will tell you, the city’s motto might as well be “Try Us” instead (“Go Birds” was a close runner-up, though).
Waymo isn’t worried, though. Surely in the birthplace of cheese steaks and Gritty, there’s room for a fleet of self-driving cars, right? That’s why the Google spin-off will soon be launching its AV ridesharing platform in the city.
Philly isn’t just any old city. It’s a fantastic stress test full of aggressive drivers, harsh winters, the infamous Schuylkill Expressway and the relentless force of the Philadelphia Parking Authority. Waymo says that this makes it invaluable in training its cars.
The service has technically been collecting data since the summer via manual driving and is just now launching its autonomous operations. The service will have a safety driver initially, joining a recent expansion to Pittsburgh, Baltimore and St. Louis.
No word on when the service will be publicly available. But just a word of warning to Waymo: don’t let hitchBOT’s fate scare you away.
100%: What Side Business Would You Want To See A Car Company In?
Hyundai-owned Boston Dynamics
You know, side gigs in the auto industry actually aren’t a new deal. I got kind of curious when seeing all of the different avenues modern car companies have embarked on. Most of them are technical, but there have been a ton of low-tech gigs over the years.
For example, Toyota has prefabbed houses, Volkswagen has currywurst sausage (yes, it has a part number) and don’t forget about Mitsubishi’s tie-in to a brewery. So what kind of weird venture would you want to see an auto company try its hand in? Let me know in the comments.
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