Fueling the Comeback: Strategic Plays in U.S. Auto and Energy Amid Regulatory Shifts

The U.S. manufacturing and energy sectors are undergoing a seismic shift as protectionist policies and regulatory rollbacks reshape industry dynamics. President Trump's sweeping tariffs on auto imports, coupled with the recent repeal of California's gas car ban, have created a fertile landscape for strategic investments in fossil fuel-dependent industries and traditional automakers. Here's why investors should pay attention—and where to position capital.

Tariff-Driven Auto Manufacturing Boom

The Section 232 tariffs, which impose a 25% duty on non-U.S. content in imported vehicles, have turbocharged domestic auto production. By shielding American manufacturers from cheaper foreign competition, these tariffs are driving a reshoring of supply chains. Automakers like Ford (F) and General Motors (GM) are ramping up U.S. assembly lines, with GM alone pledging $15 billion to expand production capacity through 2027.

The USMCA exemption further incentivizes North American manufacturing, as automakers retool plants to meet stricter regional content rules. Analysts estimate that 75% of U.S. auto production could shift to domestic facilities by 2027, up from 60% today.

While EV stocks like Tesla have stumbled due to regulatory headwinds, traditional automakers are benefiting from a resurgent demand for gas-powered vehicles.

Impact of the CA Gas Car Ban Repeal

The reversal of California's 2035 gas car ban removes a key pillar of EV adoption momentum. This policy shift, which now allows ICE (internal combustion engine) vehicles to remain on sale indefinitely, has two critical effects:
1. Slowing EV Penetration: Analysts now project U.S. EV sales to plateau at 20% of new car sales by 2030, down from earlier 35% forecasts.
2. Boosting Fossil Fuel Demand: A prolonged reliance on gas/diesel vehicles will sustain oil demand, particularly for middle- and long-distance travel.

The ripple effects extend to auto parts suppliers like Delphi Technologies (DLPH), which focus on ICE engines, and refiners such as Valero (VLO), which benefit from steady gasoline consumption.

Synergies Between Auto and Energy Sectors

The resurgence of traditional vehicles creates a virtuous cycle for fossil fuel industries:
- Oil & Gas Producers: Companies like ExxonMobil (XOM) and Chevron (CVX) will see sustained demand for crude oil, with estimates suggesting a 1.5 million barrel/day increase in global oil consumption by 2030 due to ICE vehicle longevity.
- Infrastructure Plays: Pipelines, refineries, and trucking networks are critical to fuel distribution. Energy Transfer (ET), a dominant midstream player, and Cenovus Energy (CVE), a Canadian oil sands giant, offer leveraged exposure to this theme.

The inverse correlation between oil prices and EV sales underscores the opportunity in fossil fuel stocks as regulatory tailwinds persist.

Investment Recommendations

1. Traditional Automakers:
2. Ford (F): Leading in pickup trucks and SUVs, with a 40% margin on F-150 sales.

3. Rivian (RIVN): While an EV maker, its shift toward hybrid vehicles post-CA policy change positions it as a “swing” player.

4. Oil & Gas Giants:

5. ExxonMobil (XOM): High free cash flow and shareholder returns underpin resilience.

6. Cimarex Energy (XEC): Low-cost Permian Basin producer with exposure to rising crude prices.

7. Infrastructure & Logistics:

8. Energy Transfer (ET): 6% dividend yield with dominant U.S. pipeline assets.
9. AmeriGas (APU): Propane distributor benefiting from residential and industrial demand.

Portfolio Strategy: Allocate 40% to automakers, 35% to energy stocks, and 25% to infrastructure. Avoid EV-only plays and focus on diversified firms with ICE or fossil fuel exposure.

Conclusion

The combination of U.S. tariffs and regulatory rollbacks has created a rare alignment for investors in traditional industries. While EVs will still grow, the pace is now tempered, allowing fossil fuels and ICE vehicles to reclaim relevance. This isn't just a cyclical rebound—it's a structural shift favoring domestic manufacturing and energy resilience. Capitalize on it while the policy winds are at your back.

Risk Note: Monitor geopolitical tensions (e.g., China's trade retaliation) and macroeconomic factors like interest rates, which could pressure industrial sectors.