"It's a sigh of relief," Stephanie Brinley, S&P's associate director of auto intelligence, said in a phone interview. "The regulation is stiffer than consumers are ready to come along to. Something had to change."
Analysts were quick to note, however, that turbulence still looms for Michigan and its signature auto sector. Even with the likely end of California rules, industry observers said that companies will need to balance an EV future with a gas-powered present — all while facing steeper competition from China and strategizing for President Donald Trump's tariff-heavy, regulation-light agenda.
"There's still a lot in play," Brinley said. "The spending and tax bill that takes away manufacturing (tax) credits and (EV) credits will play into this as well. And what will the actual fuel economy regulations be that the White House delivers?"
She added: "Today is waiver day, but all of these things matter for an automaker. You can't make a decision based on one. We still have a lot of uncertainty."
Brinley also noted that legal challenges from California and environmental groups are likely to follow, which adds to that uncertainty.
The head of the state's emissions regulator, the California Air Resources Board, forcefully spoke against the congressional action Thursday. CARB Chair Liane Randolph decried the environmental ramifications of the regulatory rollback and confirmed that the state would fight back.
"California profoundly disagrees with today's unconstitutional, illegal and foolish vote attempting to undermine critical clean air protections," she said in a statement. "It’s an assault on states’ rights the federal administration claims to support that puts national air quality standards out of reach and will have devastating effects for the 150 million Americans who breathe unhealthy air every day."
Randolph continued: "California will pursue every available remedy to challenge these actions and defend our right to protect the public from dangerous air pollution. Turning the clock back on both cleaner combustion engine requirements and zero-emission technology is an attack on clean air."
Waiver Opponents Celebrate
Still, opponents of the California rules treated a Thursday morning U.S. Senate vote as a major policy victory. Industry groups had lobbied hard on Capitol Hill in recent months to revoke a Biden-era waiver allowing the Golden State to enact regulations requiring 100% electrified vehicle sales by 2035.
"We thank those in the nation’s community of automotive enthusiasts and the aftermarket businesses who engaged in the advocacy process, many for the first time, to remind lawmakers that this is the United States of America, not the United States of California," said Mike Spagnola, president and CEO of the Specialty Equipment Market Association.
Even though the regulations originated from California, a handful of mostly coastal states voluntarily adopted the ambitious plan. States have adopted California rules for decades thanks to a provision of the federal Clean Air Act, but the latest regulations caused serious concerns from auto dealers in states that had signed on to California's standards.
Mike Stanton, head of the National Automobile Dealers Association, joined the chorus of industry voices lauding lawmakers.
"NADA applauds the Senate for its passage of legislation which stops California regulators from banning gas and hybrid vehicles in twelve states," he said in a statement. "This unrealistic mandate, coupled with an insufficient and unreliable charging infrastructure, would have drastically reduced consumer choice and raised prices for new and used cars and trucks for all Americans.”
Michigan was not among the states that signed on to use California's rules. But other states' commitments meant that billions of dollars were at stake for automakers, parts suppliers and workers in and around Detroit.
General Motors Co. praised the congressional action Thursday.
"GM appreciates Congress’ action to align emissions standards with today’s market realities," company spokesperson Bill Grotz said in a statement. "We have long advocated for one national standard that will allow us to stay competitive, continue to invest in U.S. innovation, and offer customer choice across the broadest lineup of gas-powered and electric vehicles.”
Ford Motor Co. referred back to a statement earlier in the week, praising the Senate's decision to vote on the matter at all despite controversy over parliamentary procedure.
“In America, the customer chooses, and we need national emissions standards that not only drive progress but also reflect market realities," Ford spokesperson Robyn Jackson said in the Tuesday statement.
Stellantis earlier in the week declined to comment on the topic, instead deferring to the Alliance for Automotive Innovation, a top automotive lobbying group. Toyota Motor Corp., the second-leading automaker in the United States last year behind GM, also deferred to the trade group.
"There’s a significant gap between the marketplace and these EV sales requirements. In reality, meeting the mandates would require diverting finite capital from the EV transition to purchase compliance credits from Tesla," said John Bozzella, the group's president and CEO, as part of a Thursday statement.
He continued: "This doesn’t help EV adoption or build charging infrastructure but does create a domino effect leading to job and manufacturing losses, higher auto prices and fewer vehicle choices."
'More Room, Less Innovation'
Brinley, of S&P, predicted that most automakers would "stay steady" with their EV investments even without the California rules.
"This isn't a situation where automakers are not investing in electric vehicles and consumers aren't buying them in greater numbers," the analyst said. "It's just that the rule right now was too aggressive to be met."
The California regulations would have required 28% fully electric and 7% plug-in hybrid sales in participating states for model year 2026, a threshold many states were far from reaching. Nationwide, EV and plug-in sales have stagnated at around 10% for the past two years.
Other analysts warned that the lack of a regulatory push on automakers to boost EV growth would severely hamper them in the long-term battle for global automotive supremacy.
"Instead of the mandate forcing them to disrupt themselves, they're left to their own devices to disrupt themselves. And I don't know if that's ever worked in real life," said Tu Le, managing director of Sino Auto Insights, an innovation and management consulting firm with offices in Detroit and China. "GM is digging their own grave."
He acknowledged the challenges facing EV development in the United States, including affordability issues and lagging charging infrastructure. But he said that "you need these types of mandates in order to make change."
Paul Waatti, director of industry analysis at AutoPacific, a market research and consulting firm, agreed with that assessment.
"This is kind of stymying potential innovation," he said in a phone interview. "It is labeled as a mandate, but we all know it was really just a target that probably would get moved if needed. Pulling that back just leaves more room for less innovation."
"Automakers are still planning for a future of EVs," he said. "This is just putting us, from a geopolitical standpoint, in a position where we're not forced to move as fast as other places like China."
Waatti added: "We're kind of handing them the ball to run with."
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