The Trump Factor: How Policy Shifts Favoring Gasoline Cars Are Reshaping Traditional Auto Stocks

The Trump administration's recent rollback of fuel economy standards has ignited a seismic shift in the automotive sector, recalibrating the competitive landscape between traditional automakers and electric vehicle (EV) manufacturers. By resetting Corporate Average Fuel Economy (CAFE) standards to 34.5 mpg by 2031-down from Biden's 50 mpg target-and eliminating the CAFE credit trading program, the administration has signaled a clear pivot toward gasoline-powered vehicles. This policy shift, dubbed the "Freedom Means Affordable Cars" initiative, has sparked a reevaluation of investment strategies, particularly for value investors seeking opportunities in a post-EV regulatory environment according to analysis.

Policy Shifts and Industry Reactions

The Trump administration's rationale for the rollback centers on affordability and consumer choice. Transportation Secretary Sean Duffy argued that Biden-era standards imposed "burdensome costs" on automakers and consumers while mandating EVs that many Americans did not want according to his statement. The new rules, which remove the CAFE credit trading system by 2028, effectively dismantle a mechanism that allowed EV-focused companies like Tesla and Rivian to monetize regulatory compliance credits according to industry analysis. This has created a regulatory tailwind for traditional automakers, which can now allocate capital to gasoline-powered vehicles and high-margin trucks and SUVs rather than costly EV retooling.

Ford and Stellantis have been vocal supporters of the policy change. Ford CEO Jim Farley called it "a victory for common sense and affordability," while Stellantis CEO Antonio Filosa highlighted its alignment with customer preferences according to company statements. The companies' stock prices have risen in response, reflecting investor optimism about reduced compliance costs and a return to core competencies in internal combustion engine (ICE) production according to market analysis.

Financial Performance and Valuation Metrics

The financial impact of the policy shift is evident in the recent performance of traditional automakers. Stellantis, for instance, reported a 13% year-over-year increase in net revenues for Q3 2025, reaching €37.2 billion, driven by strong sales in North America and Europe. The company has also announced a $13 billion investment in U.S. production to counter Trump-era tariffs, signaling confidence in its ability to capitalize on the regulatory environment according to financial reports. Ford, meanwhile, has seen its Ford Blue segment-a division focused on ICE and hybrid vehicles-generate $21 billion in revenue in Q1 2025, underscoring the profitability of its traditional offerings according to financial data.

Valuation metrics further highlight the appeal of traditional automakers. General Motors (GM) boasts a P/E ratio of 12.96 as of Q3 2025, significantly lower than Tesla's forward P/E of over 200 according to stock analysis. Stellantis, with a net profit of €5.5 billion for 2024 and a dividend yield of €0.68 per share, offers a compelling value proposition for income-focused investors according to company results. Ford's 4.63% dividend yield and improving debt-to-equity ratio also make it an attractive option, despite its high Altman Z-Score indicating potential financial instability according to financial data.

EV Makers Face Headwinds

In contrast, EV-focused companies like Tesla and Rivian are grappling with the fallout from the policy changes. Tesla's automotive revenue declined 12% year-over-year in Q2 2025, partly due to the expiration of the $7,500 federal EV tax credit according to financial reports. The company also lost $1.1 billion in regulatory credit revenue, a key income stream under Biden-era rules according to industry analysis. Rivian, which derived 6.5% of its first-half 2025 revenue from regulatory credits, faces similar challenges, with an adjusted EBITDA loss of $602 million in Q3 2025 according to financial reports. Both companies are now pivoting to hybrids and more affordable models, but their high debt-to-equity ratios (Tesla: $9.57 billion; Rivian: $28.4 billion) and lack of dividend yields make them less appealing to value investors according to financial analysis.

Strategic Implications for Value Investors

For value investors, the regulatory shift creates a clear dichotomy: traditional automakers are positioned to benefit from lower compliance costs, stable demand for ICE vehicles, and attractive valuation metrics, while EV companies face declining revenue streams and higher operational risks. The Trump administration's emphasis on affordability and market-driven production aligns with the core strengths of Ford, GM, and Stellantis, which have historically outperformed in cyclical markets according to market analysis.

However, risks remain. Environmental groups warn that the rollback could lead to 22,111 additional tons of CO2 emissions annually by 2035, potentially inviting future regulatory pushback according to environmental analysis. Additionally, while consumer demand for trucks and SUVs is robust, long-term EV adoption trends could still disrupt the market if battery costs decline or state-level incentives resurge according to industry forecasts.

Conclusion

The Trump administration's policy shifts have reshaped the automotive sector, offering traditional automakers a strategic advantage in a post-EV regulatory environment. For value investors, the combination of favorable regulatory tailwinds, strong financial performance, and attractive valuation metrics makes Ford, GM, and Stellantis compelling long-term plays. However, the sector's exposure to environmental risks and evolving consumer preferences necessitates a cautious, diversified approach. As the automotive industry navigates this new landscape, investors who prioritize resilience over speculative growth may find the most enduring returns in the "old guard" of Detroit.