Key Points
- European car companies surged after Trump announced plans to cut U.S. fuel standards.
- Major brands like Renault, Porsche, and Mercedes saw significant gains of over 4%.
- The plan is to lower the fuel economy requirement from 50.4 mpg to 34.5 mpg.
- Investors believe this will increase the profitability of traditional gasoline-powered cars sold in America.
European car stocks shot up on Thursday after President Donald Trump announced he would scrap tough Biden-era fuel-efficiency standards, a move investors see as a major financial win for the industry.
Shares of France’s Renault led the charge with a 6.1% jump, while German luxury giants Porsche and Mercedes also saw their stocks climb, rising 5.7% and 4.7%, respectively. The positive sentiment spread throughout the supply chain, with auto parts makers like Germany’s Schaeffler gaining 4.5%.
The market excitement follows Trump’s Wednesday commitment to slash the Corporate Average Fuel Economy (CAFE) rules. These regulations dictate how far vehicles sold in the U.S. can travel on a single gallon of fuel.
The Trump administration plans to roll back the current standard from 50.4 miles per gallon to a much more achievable 34.5 miles per gallon.
For European automakers, who sell millions of cars in the lucrative U.S. market, this change is a huge relief. The stricter rules put heavy pressure on them to invest billions in developing and selling electric vehicles and highly efficient hybrids, which can be less profitable than their popular gasoline-powered SUVs and luxury cars.
Lowering the fuel standard makes it far cheaper and easier for these companies to sell their existing lineups in the U.S. without facing hefty fines. Investors are betting that this policy shift will directly boost the profitability of traditional car manufacturers by easing the costly, rapid transition to an all-electric fleet.
