Why US carmakers are leaning back on petrol even as China races ahead on electric vehicles

Ford has cut EV production, laid off workers at EV plants and shifted output back to gasoline models. (Courtesy: Reuters photo)

US carmakers are facing a fundamental contradiction. On one hand, easing regulations and slowing electric vehicle demand at home are pushing them back toward big, profitable petrol-powered trucks and SUVs. On the other, the global auto market, led by China, is accelerating its shift toward electric vehicles at a pace that threatens to leave American manufacturers stranded.

General Motors, Ford and Stellantis are trying to walk both paths at once. They want to extract cash from gasoline vehicles today while promising investors they will not miss the long-term electric transition. The Wall Street Journal reports that doing both is proving increasingly difficult.

Policy shifts are changing the incentives

Several regulatory changes in 2025 have tilted the market decisively toward petrol vehicles in the US. US federal fuel-economy penalties have been removed, EV tax credits have expired, and California has lost its authority to set stricter emissions standards. As a result, BloombergNEF estimates US EV sales will fall sharply in late 2025 compared with a year earlier.

Similar retrenchments are underway in Europe, the UK and Canada, weakening the global policy push that once encouraged aggressive EV investment. For Detroit, this has made high-margin petrol vehicles the obvious near-term choice.

Why EVs have burned cash

For American carmakers, electric vehicles have been financially punishing. Ford’s EV division alone lost nearly $13 billion between 2021 and 2024, according to Visible Alpha, and the company now expects charges of almost $19.5 billion tied largely to its EV business.

Executives argue that mismatching EV production with weak demand can be disastrous. Even a single bad quarter can wipe out billions in profit, analysts note, in an industry built around just-in-time manufacturing. Against this backdrop, Ford, GM and Stellantis have cut EV production, laid off workers at EV plants and shifted output back to gasoline models.

The profit lure of petrol

Selling more petrol-powered vehicles could be highly lucrative. Ford’s CEO Jim Farley has said looser emissions rules could deliver multibillion-dollar gains over the next two years. Analysts at TD Cowen estimate combined profit boosts of several billion dollars for the Detroit three from regulatory easing.

This explains why companies insist they are merely adjusting the mix, not abandoning EVs. GM chief Mary Barra continues to describe profitable EV production as a long-term goal, even as the company leans heavily on internal combustion models.

China’s scale advantage

The deeper problem is global competitiveness. US automakers account for less than 5 percent of global EV sales, while China’s BYD, Geely and Tesla together control nearly 40 percent. Chinese manufacturers benefit from scale, faster product cycles and a policy environment that strongly favours electrification.

Industry analysts warn that without large EV volumes, US firms struggle to secure cheaper batteries, one of the biggest drivers of cost. Producing EVs alongside petrol cars in flexible factories helps reduce risk, but it also sacrifices efficiency and scale.

Can Detroit catch up later

US carmakers argue they can re-enter the EV race with cheaper, smaller models once demand improves. Ford plans a lower-cost electric pickup by 2027, while GM is redesigning vehicles to be lighter and more efficient. Yet sceptics question whether it is realistic to build competitive EVs without sustained investment and scale.

Chinese brands release new models far faster than Western rivals, and analysts caution that assuming China will stay out of the US market forever is risky.

Short-term comfort, long-term risk

For now, Detroit is comfortable selling petrol vehicles and hybrids, where demand remains strong and profits reliable. Forecasts suggest global sales of petrol and hybrid cars will continue growing into the early 2030s.

The danger is complacency. By prioritising short-term gains, US automakers may find that when the global EV transition accelerates again, they no longer have the speed, scale or technology to catch up.