This report dives into U.S. policy, its appetite for new power to promote data centers and AI growth, and the downstream impacts that has on the automotive industry and their powertrain choices. In 2025, the new U.S. administration took aim at policies that impact energy availability. The U.S. EPA has started the process to dismantle existing state-level and federal level greenhouse gas standards. We foresee that this current administration will continue to make significant changes until the 2026 midterms. Enacted policy, by that point, will remain in place until 2030 at the earliest. Automotive manufacturers and their supply chain typically work on 6-8 year product life-cycles which requires stable and predictable regulatory outcomes. Right now they are challenged to move forward in the face of uncertainty.
Key takeaways:
- Power, policy, and a compute-first decade - AI capacity, and the firm power to feed it, has become a national-interest priority. As a result, transportation and heavy industry act as policy-takers while Washington focuses on AI and grid build-out. Near-term decarbonization favors fast-to-deploy, grid-compatible options (hybrids, flexible platforms, behind-the-meter storage) over single-path bets.
- Power constraints are the bottleneck - Data centers use ~9% of U.S. generating capacity (vs. ~5% U.K., ~2.3% China). Interconnection queues are congested, ~80% of capacity withdraws before COD, and mean queue times are extreme; “first-ready, first-served” rules favor the best-capitalized buyers. This is driving moves to low-cost jurisdictions and even self-owned generation, with multi-billion-dollar cost spreads by location.
- Deregulation is the base case; compliance becomes investor-driven. Federal actions tilt toward deregulation: removal of EV purchase credits, suspended CAFE penalties, eased O&G oversight, and CRA rollbacks. The EPA GHG endangerment framework is targeted for removal by the 2026 midterms, with no realistic replacement before 2030. Boards should plan for a multi-year regime prioritizing cheap, reliable power and verifiable emissions reductions delivered by industry.
- Auto outlook - Electrification grows, unevenly, so hedge bets against a single powertrain choice. ICE will persist for at least two decades; hybrids compound share and must grow faster; BEV growth remains sensitive to policy durability, charging build-out, and cost parity. The U.S. sits near 8% BEV share through Q3-2025 versus much steeper MY27-32 targets, implying missed compliance without major shifts. The EU pushes toward a 2035 ICE sales ban while China remains the outlier (NEV >50%, BEV >30%) amid overcapacity and price wars; avoid single-pathway bets.
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