The Trump administration and its allies say that cars are too expensive. These days, not many people would disagree, but the GOP's underlying target with those claims is often electric vehicles. Now, Trump's U.S. Transportation Department seems to be going after fuel economy rules that were used by the Biden administration as a key driver of zero-emission cars. Sounds complicated? We're here to explain.
Welcome back to Critical Materials, your daily roundup for all things electric and tech in the automotive space. Today, we look at a cryptic declaration from the Transportation Department that could hamper EV growth even further. Plus, Tesla flipped the script on leased cars it bought back to use as robotaxis, and California dealers are ready to fight for a slice of Sony-Honda Afeela. Let's jump in.
30%: Trump Targets Biden Fuel Economy Rules That Inlcuded EVs
People often say that the Biden White House was driving an electric vehicle "mandate," which implies that one day, everyone would be forced to drive EVs—whether they wanted to or not. The truth is a lot more complex. In reality, the Corporate Average Fuel Economy (CAFE) Program—which requires automakers to meet a certain threshold for minimum average fuel economy across their fleets—was to get so strict that by the mid-2030s, the car companies would have to invest very heavily in electrification to meet those targets.
At one point, the average for passenger vehicles and light trucks was supposed to hit approximately 50.4 miles per gallon by 2031. You're going to need a lot of hybrids to pull that off, or EVs, which don't use fuel at all and thus drive the average down significantly.
But the Trump administration has consistently been a pro fossil-fuel one, and now, it's targeting the very idea of including EVs in CAFE standards at all. Here's Reuters with more detail:
Transportation Secretary Sean Duffy said the department’s National Highway Traffic Safety Administration on Friday submitted its interpretive rule, “Resetting the Corporate Average Fuel Economy Program” to the White House for review.
The prior administration had “illegally used CAFE standards as a backdoor electric vehicle mandate—driving the price of cars up,” he said in a statement.
Removing EVs from the calculations for credits and the regulatory mandates could result in lower overall fuel economy requirements.
There are a number of issues with this edict, obviously, including the fact that EVs and their batteries are getting cheaper over time. And that there's zero guarantee that making cars less efficient will somehow lower their end costs to the consumer.
We'll see where it goes. But as that story notes, the targets originally were slated to "reduce gasoline consumption by 64 billion gallons and cut emissions by 659 million metric tons." And if that rule isn't in place, expect automakers to be less under the gun to make more EVs—a situation some of them would clearly be thrilled with.
60%: Tesla's Bought Back Leased Cars To Use As Robotaxis, It Flipped Them Instead
Back in 2019, Tesla CEO Elon Musk let the world know that if they chose to lease one of the automaker's Model 3 EVs, they eventually wouldn't be able to buy it once the lease was up. Why? Well, Tesla wanted them back—not to resell, but to build into a massive robotaxi fleet.
"Next year for sure," said Musk in October 2019. "We will have over a million robotaxis on the road. The fleet wakes up with an over-the-air update. That’s all it takes.”
It's now 2025 and there are no robotaxis. Those vehicles purchased on the promise of being appreciating assets thanks to Full Self-Driving? Not only have they depreciated faster than anything else on the market, but millions of them likely don't actually have the hardware capable of unsupervised autonomy as promised. And as it turns out, according to multiple former Tesla employees speaking with Reuters, those former lease cars were never used for their intended purpose of becoming robotaxis. Instead the prices were inflated using software updates and sold as used.
Here's the scoop from Reuters:
Rather than storing the used cars—a fast-depreciating asset—Tesla started adding features to them through software upgrades. It then sold the vehicles to new customers who would pay thousands more than lease-end buyers would have, the people said.
The practice was an easy way to “jack up the price” of the used vehicles, said one of the people, who asked not to be identified.
Although counter to what Musk said publicly—and descriptions Tesla gave on its website regarding lease terms—the tactic appears to have been legal. Still, the practice denied lessees the industry-standard option of buying their vehicles and misled them for years about why.
It also perpetuated the myth among investors that Tesla was near fully autonomous driving technology. That belief has helped buoy Tesla stock, whose value has far outpaced current earnings and made it the world’s most valuable automaker.
Here's how it worked: Tesla told customers that they simply couldn't buy their cars once the lease ended. Justifiable, if you believed the robotaxi story. But instead of putting those cars in some autonomy incubator, Tesla just sold them—sometimes with software upgrade like its Full Self-Driving suite (which cost up to $12,000 at its peak) or $2,000 Acceleration Boost.
For consumers who expected their off-lease cars to be returned and used for The Mission, this feels like a betrayal. But for investors that were betting on Tesla's inventory being the key to a successful ride hailing launch? That's a whole different story.
Ark Investment Management, a longtime investor in Tesla, said in October that it expected Tesla to use off-lease cars to jumpstart its robotaxi service. But now that Tesla is on the eve of launching a trial of its robotaxi service and has given lessees the option to buy out their cars, investors surely have to start wondering just how quickly Tesla can deploy the "million" robotaxis that Musk promised would be roaming the streets in 2020.
This was a classic Tesla move: promise the future, monetize the present. While there might not have been anything inherently illegal with what Tesla did, that doesn't mean it sits well with the folks who agreed to turn over their vehicles to support the automaker's growing ventures. These cars, which Tesla pledged were to be used for starting its robotaxi service, were instead flipped for a quick buck. Meaning that the road to autonomy is actually paved with lease-end markups and loosely-applied promises.
90%: California Honda And Acura Dealers Really Don't Want Afeela Selling Directly To Consumers
Afeela, the sleek EV startup founded by Honda and Sony, hasn't even put tire to road in California yet and it's already hitting a legal speedbump. Unsurprisingly, it comes in the form of auto dealers.
In an official cease-and-desist letter penned by the California New Car Dealers Association, it demanded that Sony Honda Mobility (that's the official name of the parent company behind Afeela) immediately stop direct-to-consumer sales of the Afeela 1. The dealers claim that the move violates California's dealer franchise laws and, of course, dealers want in on their slice of money pie.
The issue? While Sony Honda Mobility is technically an independent joint venture, the association argues that Honda and the JV are just two heads of the same corporate hydra—and that's the technicality we've seen in fights against other automakers like Volkswagen's Scout brand.
Here's what Automotive News has to say:
Cutting Honda and Acura dealers out of the opportunity to sell the Afeela 1 violates state franchise laws prohibiting manufacturers and their affiliates from directly competing with their dealers, according to the association.
“On behalf of our California dealers, we’re not going to stand idle while violations to our franchise law are perpetrated by our dealers’ manufacturer partners,” Brian Maas, president of the California New Car Dealers Association, told Automotive News.
“We hope Sony and Honda realize that they are—in our view—violating California law, and they work to use dealer partners to distribute Afeela vehicles in California,” Maas said.
Where things get stickier than Scout is how the JV plans to build the Afeela 1. The EV will be assembled at Honda's EV hub in Marysville, Ohio—a plant owned and operated by Honda. Scout, despite being an independent subsidiary of Volkswagen and sharing a considerable amount of the German's know-how, has broken at its own facility in Blythewood, South Carolina. To the CNCDA, this difference helps to build the argument that the Sony Honda JV is actually a Honda vehicle through-and-through, meaning that its dealer network should get first dibs.
Honda, like Volkswagen to Scout, maintains that it's a separate company.
"[American Honda] will not be involved in the decision-making of Sony Honda or the distribution, sale or service of Afeela vehicles, which, of course, are not one of American Honda’s brands,” a spokesperson said in a statement. They later continued: “American Honda remains committed to the dealer franchise model.”
Whether or not the argument for either side will work is an unknown. Dealers are getting antsier as more and more automakers push forward with direct-to-consumer sales. After all, it's money that dealers wouldn't be seeing at the end of the day.
The whole thing just feels reminiscent of a classic mob movie where every gangster wants a cut for the outsider selling on their turf. Dealers believe that they're entitled to the commission of these sales, while automakers want to adapt to a changing market. Which side will prevail?
100%: What Matters More When Car Shopping—Dealer Trust Or Convenience?
Times are a-changing in the car buying world. Gone are the days when folks wanted to build a long-lasting relationship with the dealer their father bought from, and in is the modern way of buying: right from your phone. Or, that's what it seems like, at least.
In reality, folks still need somewhere to get their vehicles serviced, and some people like to get their hands on a car to really be sold the vehicle. It might be because they're not savvy on the latest tech, or that they simply don't know what they want. It's a toss-up, really, and circumstances depend on the person shopping for the car.
That being said, do you prioritize convenience (like being able to shop anywhere, anytime, without any sales pressure), or do you trust the dealership to help advocate for you when buying? Let me know in the comments.
