You may not live in the state of California. But it has a huge impact on what you drive.

Currently, 17 other U.S. states follow some or all of California’s stricter fuel economy and emissions rules, which equates to about 40% of new vehicles sold in this country. If California tells the car companies to jump, they basically have to say, “How high?”

So when President Donald Trump escalated his war on electric vehicles last week by signing a resolution blocking California’s 2035 ban on new gas-powered cars, and when California filed a lawsuit in response, what comes next could be nothing less than the title fight for the automotive landscape in America.

That kicks off today’s edition of Critical Materials, our morning roundup of industry and technology news. Also on deck today: the United States is also easing rules on the “sales” of autonomous vehicles in a way that could benefit Tesla, and Vietnamese upstart automaker Vinfast announces a big expansion plan. Let’s dig in.

30%: Trump Hits California, California Hits Back

Hyundai Ioniq 5 and Ioniq 6 at Tesla Supercharger station in San Clemente, California

Photo by: Hyundai

Nominally, Trump’s Republican Party is the “states’ rights” one. But the practical application of that philosophy can be inconsistent, especially where California is concerned. Trump was clear on this when he signed a resolution that blocks the state’s clean air standards program and says they are superceded by the standards set by the national Clean Air Act. 

“It is the federal government, not states, that should establish vehicle emissions standards, given the inherently interstate nature of air quality; a patchwork of state vehicle regulations on this subject is unworkable,” Trump said in the resolution. A measure approved by the California Air Resources Board in 2022 requires all new cars, SUVs and pickup trucks sold in the state to generate zero tailpipe emissions by 2035.

In blocking that plan, Trump threatens what could’ve been a widespread shift to EVs in this country, especially since 12 other states and the District of Columbia have announced plans to follow California’s lead into that zero-emission future. If that was the kind of future automakers were facing, they effectively would’ve had no choice but to build more and better EVs.

But California isn’t just taking this lying down. Not only did Gov. Gavin Newsom sign an executive order reaffirming the gas car ban, his attorney general, Rob Bonta, also filed a lawsuit against the federal government to halt this reversal. California continues to lead the nation in EV sales, with about 25% of all new cars sold there being zero-emission. 

“If California is prevented from enforcing these vehicle emission standards, it will result in the loss of significant economic and public health benefits, costing California taxpayers an estimated $45 billion in preventable health care costs,” state officials said in a news release. “Despite decades of progress, tens of millions of Californians still breathe some of the worst air in the nation—these regulations were specifically designed to change that.”

They added: “Losing these standards would also undermine market certainty for vehicle manufacturers, stifling innovation and job creation, including in the electric vehicle sector, which has been a growing source of high-paying green jobs and investment.”

What’s more, 10 other states joined California’s lawsuit, including New Jersey, New York, Oregon and New Mexico. It cites decades of established EPA precedents and case law in saying that California does have a right to assert its own emissions standards, and other states have a right to join them. 

Again, it’s important to think of this not just as another tiff between Trump and Newsom, but a legal battle that will have profound implications on what the cars of the future will be like. Many automakers have lobbied against California’s EV mandate too, arguing that the regulations create a new car market that may not line up with demand—all while they struggle to ramp up EVs profitably. 

Even if California were to ease off the 2035 of its own accord over the next few years, the fight over the state’s power to have a say there at all will have profound effects on the entire country.

30%: U.S. Eases Autonomous Vehicle Deployment Rules

Tesla Cybercab, LA Auto Show 2024

Photo by: InsideEVs

Meanwhile, the Trump administration has done something that most experts in the space agree was long overdue: create more of a federal framework to deploy autonomous vehicles nationwide.

For the longest time in America, the AV industry was limited by a patchwork of state-by-state and city-by-city regulations. Now, the National Highway Traffic Safety Administration has a new rule that cold speed things up a bit. 

From NHTSA, emphasis mine:

The exemption will continue to allow manufacturers to sell up to 2,500 motor vehicles per year that do not fully comply with the Federal Motor Vehicle Safety Standards. This includes vehicles that do not have traditional steering wheels, driver-operated brakes, or rearview mirrors. Manufacturers must demonstrate that their vehicles provide an equivalent safety level as compliant vehicles and that the exemption is in the public interest. This latest development builds on Secretary Duffy’s innovation agenda and NHTSA’s AV Framework.

However, the rule doesn’t specify what the word “sell” means in this context, or to whom. After all, a driverless Waymo vehicle isn’t “sold” into private hands; it’s purely a fleet vehicle owned by the company itself. Or what about Tesla’s alleged Cybercab, which definitely does not have a steering wheel or pedals? It’s hard to see that car being “sold” to the general public, at least at current technology levels. 

Well, that verbiage is largely being interpreted as a gift to Tesla, even if Trump and CEO Elon Musk probably aren’t best pals anymore. Here’s Bloomberg to explain: 

As a result of the changes, NHTSA “anticipates reaching decisions on most exemption requests within months rather than years,” NHTSA Chief Counsel Peter Simshauser said in the letter.

The move takes aim at one of the biggest regulatory hurdles facing Tesla’s plan to field its self-driving Cybercab in large numbers. The vehicle, revealed on a Hollywood studio lot last year, lacks a steering wheel and foot pedals, jeopardizing Tesla’s ability to introduce it without an exemption from the agency.

It’s hard to see where this goes right now. It’s obvious that the AV deployment process needed some national standards at some point, but it’s also difficult to foresee any other automakers rushing out to sell cars that don’t have conventional controls. Musk may want to put Cybercabs on the road as quickly as possible, but Tesla certainly has a lot to prove there, to put things diplomatically. 

90%: Vinfast Dials Back U.S. Plans, Aims For Asia

VinFast VF3 series production model

Speaking of companies with a lot to prove: Vietnamese automaker Vinfast’s U.S. debut has been met with widespread criticism over the EVs’ quality and potential safety issues. But globally, the car company owned by Vietnam’s richest man (and the head of the massive Vingroup conglomerate) isn’t backing down. Today in Hanoi, it announced a bold plan to build 1 million EVs by 2030. 

For now, that means slowing down on its once-aggressive U.S. plans to focus more on expansion into other Asian markets instead. 

Here’s The Nikkei with more: 

The company intends to make 500,000 EVs in 2027, said Thai Thi Thanh Hai, Vingroup’s vice president, and VinFast Global’s deputy CEO.

VinFast’s sole operating plant is in Vietnam’s northern Hai Phong city. Its current capacity of 250,000 cars a year could be extended to eventually 950,000 units per annum. Its other plant in Vietnam, due to open later this year in Ha Tinh province, has a planned capacity of 300,000 EVs a year, and could be doubled to 600,000 in the future.

VinFast’s first overseas plant in India, scheduled to open in July, is expected to have an annual capacity of 150,000 EVs. It is also building a factory in Subang, Indonesia, expected to start later this year, with a planned capacity of 50,000 EVs. The company has delayed a plan for a U.S. factory.

[…] VinFast was once focused on the U.S. market, but high logistics costs, taxes, and fees, combined with poor sales, led to significant losses. The company now focuses heavily on Asia, with 90% of sales last year coming from its home market.

To cut costs, VinFast is switching its sales strategy in Western markets to focus on dealer showrooms and close down many of its own showrooms. In Asia, it is expanding into Indonesia, the Philippines, and India while also eyeing the Middle East and African markets.

That’s an aggressive ramp-up for sure. But it may behoove Vinfast to focus on other markets in the world before it tries its hand at the most competitive ones, like the U.S. and Europe. 

100%: How Does California’s Emissions Regulations Battle End?

Rivian California Dune Edition R1S and R1T

Photo by: Rivian

Your guess is as good as mine as to how the California vs. Trump fight will shake out. It could well take its years to wind through the legal system and even end up at the hands of the Supreme Court. How do you see this netting out here, and what happens to the U.S. auto market if California loses? Share your thoughts in the comments.

Contact the author: patrick.george@insideevs.com