The U.S. government on Thursday announced a major rollback of fuel-economy and emissions regulations, a move that immediately boosted European automaker stocks by easing one of their biggest cost burdens. The policy shift, revealed in Washington, outlines what standards are changing, who benefits most, where the impact will be felt, why the Biden administration reversed course, when the new rules take effect, and how they could reshape global vehicle markets in the coming year.

Under the revised framework, the United States will no longer require carmakers to meet aggressive mileage and emissions targets that had previously pushed manufacturers toward rapid electric-vehicle production. Analysts say this gives European firms—especially those producing SUVs and higher-emission models—more breathing room, reducing compliance expenses and expanding their sales potential in the world’s second-largest auto market.

European auto shares rose across Frankfurt, Paris and Milan, with traders noting strong upward movement among companies like Volkswagen, Stellantis and BMW. Market strategists say investors are betting that easing U.S. rules will lift profit margins at a time when EV demand is slowing and traditional vehicle lines remain some of the industry’s strongest revenue drivers.

Environmental groups, however, argue that the rollback could widen regulatory conflict between the United States and the European Union, which currently enforces some of the world’s strictest emissions standards. They warn that the move may complicate transatlantic trade discussions and trigger new tensions over climate accountability and auto-sector competitiveness.

Despite the criticism, investors remain bullish, saying the shift may temporarily redirect global demand toward gasoline-powered cars while giving European carmakers a stronger foothold in a market where EV adoption has flattened. Analysts expect continued volatility as governments worldwide weigh economic pressure against long-term climate policy commitments.

Source: Reuters