The EV Policy Shift: How Deregulation and Affordability Could Reshape the Auto and Energy Sectors

The U.S. electric vehicle (EV) landscape is undergoing a seismic transformation as policy shifts under the Trump administration reshape investment dynamics in both the automotive and energy sectors. The expiration of the $7,500 federal EV tax credit on September 30, 2025, has triggered a 49% drop in EV sales in October of that year, with Ford reporting only 1,500 F-150 Lightning pickups sold-a stark contrast to its annual target of 150,000 according to industry analysis. This policy-driven "EV winter" has forced traditional automakers to recalibrate strategies, while energy infrastructure companies face a recalibration of priorities in a market now defined by affordability and regulatory uncertainty.

Strategic Opportunities in Traditional Automakers

The shift away from aggressive electrification has created a pivot toward hybrid technologies and cost-optimized EV platforms. General Motors (GM) and Toyota, for instance, have announced plans to reintroduce plug-in hybrids in North America by 2027, leveraging their existing hybrid expertise to capture market share in a segment now dominated by internal combustion engine (ICE) and hybrid models. Ford's investment in the Ford Universal EV Platform (FUEVP), designed to produce affordable EVs priced around $30,000, underscores the industry's focus on affordability as a key driver of adoption.

For investors, this transition presents dual opportunities. First, automakers like Ford and GM are refocusing on higher-margin ICE and hybrid models, which could stabilize profitability amid EV market volatility. Ford's consideration of discontinuing its F-150 Lightning program-citing $13 billion in losses-reflects a strategic realignment toward more profitable segments. Second, the development of low-cost EV platforms, such as FUEVP, positions automakers to capitalize on long-term demand for affordable electrification, particularly in price-sensitive markets.

However, the risks are significant. The Trump administration's rescission of California's emissions standards and federal EV mandates has removed regulatory tailwinds that previously accelerated electrification. This creates a fragmented policy environment, where automakers must navigate divergent state-level regulations. For example, 17 states have adopted California's Advanced Clean Cars II standards, mandating 100% zero-emission vehicle sales by 2035. This duality-federal deregulation versus state-level electrification mandates-could lead to uneven market growth and operational complexity for automakers.

Energy Infrastructure: Navigating Policy Uncertainty

The energy infrastructure sector is also adapting to the new policy reality. While federal incentives for EV charging infrastructure, such as the $4,000 used EV tax credit and the $7,500 new EV credit, have expired, state-level programs and utility investments are filling the gap. The National Electric Vehicle Infrastructure (NEVI) Formula Program, for instance, has allocated $5 billion to expand public charging corridors, with $4 billion already committed. Companies like ChargePoint and Tesla have capitalized on this momentum, with ChargePoint capturing 50% of Level 2 charging capacity additions in Q2 2025.

Despite these gains, the expiration of federal incentives has introduced uncertainty. The One Big Beautiful Bill Act (OBBB) has accelerated the phaseout of IRA-era tax credits, including the Section 30C credit for residential charging installations, which now expires by June 30, 2026. This has created a "race against the clock" for developers to finalize projects before deadlines, with some companies prioritizing projects that can achieve "beginning of construction" status by December 31, 2025 according to industry analysis.

Investors should also monitor the impact of foreign ownership restrictions under the OBBB's Foreign Entity of Concern (FEOC) rules, which bar projects with significant ties to China or other designated countries from accessing federal subsidies. This has spurred a shift toward domestic supply chains, with companies like Ford and General Motors increasing investments in U.S.-based battery production.

Conclusion: Balancing Short-Term Gains and Long-Term Risks

The EV policy shift of 2025 has created a bifurcated market: one where traditional automakers are leveraging hybrids and cost-optimized EVs to stabilize profitability, and another where energy infrastructure companies are navigating federal rollbacks while capitalizing on state-level support. For investors, the key lies in identifying companies that can adapt to this dual dynamic. Automakers with strong hybrid capabilities and affordable EV platforms, such as Ford and Toyota, offer near-term resilience, while energy infrastructure firms with diversified funding sources-spanning federal, state, and private partnerships-position themselves for long-term growth.

However, the absence of federal regulatory clarity remains a wildcard. If states continue to enforce stringent emissions standards, automakers and infrastructure developers may yet find themselves in a pro-electrification environment. Conversely, a sustained federal focus on deregulation could entrench ICE and hybrid dominance for years to come. Investors must weigh these scenarios carefully, prioritizing flexibility and adaptability in their portfolios.