U.S. Rolls Back EV Mandate, Reduces Fuel Economy Standards to Lower Car Costs

The U.S. government announced a significant policy reversal with the "Freedom Means Affordable Cars" proposal, rolling back stringent fuel economy standards established during the Biden administration. The new framework lowers the Corporate Average Fuel Economy (CAFE) standards to 34.5 mpg, a figure last set in the late 2000s, and slows future increases. This shift aims to reduce the average new car price by about $1,000 and generate up to $109 billion in national savings over five years. It ends federal regulations that effectively mandated electric vehicle (EV) adoption despite low consumer demand and high compliance fines for automakers. The previous administration's aggressive CAFE targets contributed to rising new vehicle prices, crossing $50,000 on average, and monthly payments nearing $750, pushing consumers to retain older vehicles longer. The regulatory regime, which aligned federal standards with California’s, created incentives favoring EV production despite stagnant sales and infrastructure challenges, such as insufficient charging stations and grid capacity concerns. Auto manufacturers have reacted positively to the regulatory rollback. Stellantis, Ford, and General Motors each announced billions in domestic investment to expand U.S. vehicle production and retool plants, supporting job creation and reducing reliance on imports. Labor unions like the United Auto Workers have also endorsed the changes due to their potential to boost American manufacturing employment. Additionally, the new policy includes a tax provision allowing consumers to deduct interest on financing for American-made cars, helping enhance affordability amid a market with limited accessible new vehicles. This measure has the backing of the National Auto Dealers Association and aims to stimulate domestic auto sales. A pivotal regulatory change enabling this shift was the Congressional Review Act action that rescinded California’s special emissions waivers, effectively dismantling the state's influential role in setting national auto environmental standards and eliminating the embedded EV mandate. Industry experts caution the retained existence of CAFE standards remains a political vulnerability, as future administrations could reinstate stricter targets. Some advocate for eliminating CAFE entirely and regulating emissions directly via the Environmental Protection Agency, allowing market dynamics to guide fuel type adoption. Data indicates EVs still comprise a small fraction of U.S. vehicles on the road at 2.3%, with only 6% of new vehicle sales as of November 2025, accompanied by high consumer rejection rates due to factors like cost, charging limitations, range anxiety, insurance expenses, and performance in varied climates. The Biden-era regulatory approach has negatively impacted U.S. auto manufacturing, halving production and resulting in inefficient spending on EV infrastructure with minimal tangible outcomes. The new policy seeks to rectify these misalignments by aligning regulations with technological readiness, market demand, and consumer preferences. Overall, the "Freedom Means Affordable Cars" proposal marks the most substantial adjustment to U.S. auto policy in over a decade. It signals a pivot toward more attainable vehicle prices, increased consumer choice, and stronger domestic manufacturing investment, contingent on maintaining a balance between reducing regulatory burdens and continuing environmental oversight. The future trajectory of fuel economy and emissions standards will depend on evolving political priorities.