In July 2025, U.S. President Trump effectively nullified federal fuel‑economy standards. While the Corporate Average Fuel Economy (CAFE) mandates technically remain on the books, the bill eliminates all penalties for non-compliance, including retroactive relief dating back to model year 2022. As a result, automakers can now produce “gas‑guzzlers” without financial repercussions, marking a major rollback of regulations originally introduced in 1975 to curb oil dependence and emissions.
Key Changes
The OBBBA makes three significant moves:
- Removes fines tied to CAFE violations, allowing automakers to ignore standards without penalty.
- Void action against California and other states’ zero‑emission mandates, which aimed to ban gasoline‑only vehicle sales by 2035.
- Repeals EV tax credits, phases out battery subsidies by 2028, and imposes a new annual “EV fee” of USD 250.
Together, these changes peel back layers of regulations intended to push manufacturers and consumers toward smaller, more efficient, and electric vehicles.
Industry Response: A Shift Toward Bigger Engines
Without penalties, manufacturers face little incentive to invest in fuel-efficiency innovations. Observers note a return to larger engines, including V8S. Stellantis has reintroduced the Hemi V8, while GM is repurposing EV plants for internal combustion engine production. Critics argue this rollback will slow innovation and increase emissions, while proponents cite consumer affordability and energy independence.
Middle East Implications: Fuel Reign Over Singles
1. Import Patterns Shift
U.S. automakers now have no penalty for exporting larger-engine vehicles. In the Middle East, where fuel prices remain low and preferences skew toward SUVs, markets may see more aggressive entry of high-displacement American models, including those with V8S and bigger powertrains.
2. Competitiveness Of EVs
Without California’s zero-emission benchmarks and with higher consumer costs in the U.S. global EV scale may slow. This could further delay or downscale EV efforts targeting GCC markets, where charging infrastructure and policy incentives are not yet mature.
3. Pricing Effects
Increased production of gasoline-heavy models and diminished U.S. EV subsidies may keep Middle Eastern EV prices artificially high if manufacturers pass reduced volume costs onto consumers.
4. Regulatory Diversification
While the U.S. scales back, Europe, China, and Middle Eastern governments (e.g., UAE, Saudi Arabia) continue to promote EVs and hybrids through incentives. Automakers selling in these markets must balance regional demands, potentially splitting lineups between ICE-heavy U.S. exports and electrified Gulf versions.
Final Word: Market Duality Emerges
The U.S. rollback pads the runway for bigger, thirstier vehicles, both domestically and in export markets. This contrasts with the EV momentum in Europe and the Gulf, creating a two-track global auto strategy. For Gulf consumers, this may mean better access to large-engine vehicles at lower prices, but also slower advancement of EVs and hybrids, unless automakers maintain separate, electrified platforms for the region.
In short, while American regulations have backtracked, the rest of the world continues charging ahead. Gulf policymakers and consumers may face a bifurcated market, blending old-school fuel guzzlers with emerging electric ambitions.
