While Washington has pulled back on electric vehicle mandates and emissions enforcement, California is moving in the opposite direction—and the nation’s largest automakers are paying close attention.
This week, executives from the Detroit Three are sitting down with regulators from the California Air Resources Board, reopening a conversation that has become increasingly consequential for the future of the U.S. auto industry and your vehicle choices.
The meetings come at a pivotal moment. Congress has revoked California’s long-standing authority to set its own vehicle emissions standards, federal fuel economy rules have been weakened, and financial penalties for missing emissions targets have been eliminated.
Yet California is signaling it has no intention of slowing its pursuit of zero-emission transportation.
Instead, the state is preparing to launch a $200 million electric vehicle incentive program designed to offset the loss of the federal $7,500 EV tax credit and keep pressure on automakers to electrify their fleets.
For the Detroit automakers, the calculus is complex. Federal relief has eased near-term compliance costs, but California remains the largest single automotive market in the country and a regulatory bellwether for more than a dozen other states.
Ignoring Sacramento has never been a viable long-term strategy, regardless of which party controls Washington.
California Air Resources Board Chair Lauren Sanchez made that clear in a recent interview, stating that the state is accelerating its work on zero-emission vehicles while attempting to manage what she described as a transition that accounts for environmental goals, workforce stability, and industry realities.
That balance, however, is increasingly difficult as political and legal battles reshape the regulatory landscape.
California’s authority to lead on emissions policy dates back decades. The federal Clean Air Act of 1970 granted the state unique permission to seek waivers from the Environmental Protection Agency, allowing it to impose stricter emissions rules than the federal government.
Other states were then permitted to adopt California’s standards instead of federal ones, giving the state outsized influence over national vehicle design and production.
That authority has now been curtailed. Using the Congressional Review Act, lawmakers rescinded California’s Advanced Clean Cars II waiver, which would have required a phaseout of new gasoline-powered vehicles by 2035.
Congress also revoked waivers governing zero-emission heavy-duty trucks and stricter nitrogen oxide limits on diesel engines. At the same time, the administration moved to halt the collection of penalties for automakers that fail to meet federal tailpipe standards.
For automakers, the immediate financial implications are significant. General Motors has said the rollback of federal emissions rules could save the company as much as $750 million. After they lost over $7B the last quarter.
Those savings matter in an industry facing high interest rates, slowing EV demand, and rising production costs.
Yet California officials argue that short-term relief may come at a long-term cost. State regulators contend that weakening U.S. emissions and efficiency standards risks surrendering technological leadership to global competitors, particularly China, which has aggressively supported electric vehicle manufacturing and battery development through government policy and subsidies.
From California’s perspective, the new $200 million EV incentive program is intended to bridge a growing gap. With federal tax credits gone, and not returning, EVs remain more expensive than comparable gasoline vehicles for many consumers.
State incentives are meant to keep demand from stalling further while encouraging manufacturers to continue investing in electrification rather than retreating from it altogether. EV sales are way down across the US.
Automakers, however, are navigating a market that no longer aligns neatly with policy ambitions. Consumer interest in electric vehicles has cooled compared to earlier projections, charging infrastructure remains uneven, and concerns about affordability, higher insurance rates and resale values dropped off dramatically.
Manufacturers are now adjusting production plans, delaying some EV launches, and reemphasizing hybrids and internal combustion vehicles that meet consumer demand.
That disconnect has fueled tension between California leaders and the auto industry. Governor Gavin Newsom sharply criticized GM last year after the company supported federal efforts to roll back California’s authority, accusing the automaker of undermining years of emissions progress.
GM responded by emphasizing California’s importance as a market and reaffirming its commitment to dialogue with regulators, even as it welcomed regulatory relief at the federal level. Mostly because GM can’t operate at a loss. EVs have been nothing but a loss for all automakers.
The legal fight is far from over. California officials expect to challenge anticipated efforts to rescind the EPA’s “endangerment finding,” the scientific determination that greenhouse gas emissions pose a threat to public health.
That finding underpins much of the federal government’s authority to regulate vehicle emissions. If repealed, it would represent one of the most significant shifts in environmental policy in decades and would almost certainly trigger prolonged court battles. Lee Zeldin is fighting this change.
California regulators have already pulled back some proposals as they still demand all EVs on the road. Prior to the current administration taking office, the state withdrew waiver requests that would have imposed the nation’s strictest locomotive pollution rules and forced timelines for replacing diesel trucks with zero-emission alternatives. State officials described those moves as strategic, preserving flexibility while exploring other regulatory and incentive-based approaches.
For automakers, the lesson is familiar. Regulatory swings are inevitable, but market access is permanent. California’s economy rivals that of entire nations, and its policies continue to influence vehicle standards well beyond its borders.
Even without formal waiver authority, the state retains powerful tools through incentives, procurement policies, and partnerships that can shape product planning and investment decisions.
The Detroit Three’s willingness to stay engaged reflects a recognition that today’s rollback may not be tomorrow’s reality. Political power shifts, court decisions evolve, and regulatory frameworks are rarely static.
Maintaining open lines of communication with California regulators is less about immediate concessions and more about long-term positioning in an industry where product cycles span decades.
The broader question is whether policy can realistically move faster than consumers. Mandates and incentives can steer development, but they cannot force widespread adoption if affordability, infrastructure, higher insurance rates and trust lag behind. California’s renewed push underscores a fundamental tension in the EV transition: the difference between regulatory ambition and market readiness.
As federal and state governments continue to diverge, automakers are left to bridge the gap.
The meetings in Detroit with California this week may not resolve that tension, but they highlight an undeniable truth. Regardless of political shifts in Washington, California intends to remain a central player in shaping the future of transportation, and the auto industry cannot afford to look away.
Even though it’s not constitutional for California to make the rules. It’s time to stop allowing one state to make the rules for the other 49.
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Lauren Fix is an automotive expert and journalist covering industry trends, policy changes, and their impact on drivers nationwide. Follow her on X @LaurenFix for the latest car news and insights.
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