USA - Nationwide: A Transportation: Road (Automotive) Overview

The US automotive industry employs more than 10 million people and forms a critical part of the nation’s industrial base. The heavily regulated and capital-intensive industry is in the midst of disruptive technological and economic change and uncertainty. Because automaker product cycles are typically four to seven years, a stable regulatory and policy environment is important for industry planning and investments. Over the last two decades, however, oscillating government policies have sometimes disrupted plans and stranded investments.

Emissions and Fuel Economy Standards, Reduced EV Incentives

Significant changes in federal environmental and fuel economy regulations may result in reduced new vehicle costs. In February, the United States Environmental Protection Agency (EPA) rescinded its “endangerment finding” that formed the basis for regulation of vehicle emissions of greenhouse gases (GHGs) and repealed Clean Air Act (CAA) GHG auto emissions standards. Congress repealed the pre-emption waiver that allowed California and other states to adopt more stringent emissions standards. Thus, automobiles sold in the US are no longer required to meet increasingly stringent limits on GHG emissions. The EPA has also proposed to defer the effective date of more stringent standards for other CAA criteria pollutants from model year (MY) 2027 to MY 2029.

Last year, Congress eliminated monetary penalties for failure to meet corporate average fuel economy standards. A pending Department of Transportation (DOT) regulation would reduce the stringency of Corporate Average Fuel Economy (CAFE) standards themselves for vehicle MY 2022–2031, eliminate electric powertrain vehicles from CAFE calculations, and prohibit manufacturer trading of fuel economy credits. Along with elimination of electric vehicle (EV) tax credits and funding, these changes likely will reduce US consumer demand for new electric-powered vehicles. In Q1 2026, new EV sales dropped by more than 27% in comparison to the same period in 2025, while at the same time used EV sales increased by approximately 12%.

The regulatory landscape for internal combustion and electric propulsion vehicles remains unsettled. In the absence of federal regulation of GHG emissions, states may act to regulate such vehicle emissions. The viability of such state regulation is uncertain, as courts could hold that federal law – including a decision not to regulate – pre-empts state regulation. Further, Loper Bright’s elimination of deference to agency interpretations of statutes could potentially make the EPA’s rescission of the endangerment finding more vulnerable in the multiple pending court challenges.

Companies across the industry should assess how ongoing regulatory environment developments and related market shifts may affect their commercial strategies.

Motor Vehicle and Highway Safety Regulation

Approximately 40,000 people die in vehicle crashes annually in America. The DOT National Highway Traffic Safety Administration (NHTSA) has announced several regulatory efforts aimed at reducing crashes, injuries, and fatalities, including modernizing federal vehicle safety standards, and adoption of a new automated vehicle (AV) framework to facilitate the safe deployment of autonomous driving systems and “Advanced Driver-Assistance Systems” ADAS. NHTSA seeks to work with industry and roadway users to develop standards and initiatives to enhance roadway safety and mobility, remove unnecessary regulatory barriers, reduce risky driving behaviors, and improve pedestrian safety. Other DOT agencies are also pursuing policies to mitigate roadway safety risks. Pending changes provide opportunities for interested parties to help to shape important transportation regulations for the future.

Increased vehicle purchase costs may slow the integration of new vehicle safety, automation, and other advanced technologies into the American car market. The average price of a new passenger vehicle in the US is nearly USD50,000, and consumers are increasingly deferring new car purchases – the average age of US passenger cars has climbed to 12.5 years. In addition to limiting potential vehicle safety gains, the rising costs of new vehicles and increasing fuel costs may present additional challenges for OEMs, suppliers, and new car dealers, by reducing US consumer demand for higher margin SUVs and light trucks. Price pressures and other factors may also accelerate efforts by manufacturers – particularly new market entrants – to change laws limiting direct-to-consumer sales, with major potential consequences for auto dealers.

Motor Carrier and Logistics Developments

The regulatory landscape for road carriage and logistics in the United States is changing due to court rulings, emerging vehicle technologies, and other developments.

In Montgomery v. Caribe Transport II, the Supreme Court held that the Federal Aviation Administration Authorization Act (FAAAA) does not pre-empt state-law negligent-hiring claims against freight brokers, establishing that brokers can be sued under state tort law. Among the implications of this decision is that shippers, brokers, and logistics providers will need to strengthen carrier vetting protocols, contractual risk allocation, and insurance programs to manage expanded potential liability exposure.

Autonomous, electric, and alternative fuel trucks are advancing toward commercial viability. As these technologies near deployment at scale, they may require significant operational, regulatory, and infrastructure adaptation by manufacturers, carriers, fleet operators, and shippers.

Tariffs, trade restrictions, a marked increase in cargo theft and freight fraud, as well as other forces are challenging supply chain practices and resilience. Companies should be assessing their supply chain risk management strategies, including carrier agreements, insurance coverage, and security protocols.

Federal Surface Transportation Reauthorization

Federal funding for highways and infrastructure expires on September 30, 2026. Legislation authorizing the next five years of funding is pending in Congress. The House Transport & Infrastructure Committee recently reported its version, the BUILD America Act. The bill provides for USD580 billion in funding for transportation infrastructure in FY 2027–2031, including approximately USD474 billion to the federal Highway Trust Fund (HTF); the largest ever funding for bridges; USD87 billion for the Federal Transit Administration, and USD64.7 billion to the Federal Railroad Administration and Amtrak. It would also create a new HTF revenue source via annual EV/PHEV fees; streamline federal reviews; and mandate a federal framework for ADS-equipped heavy trucks. If a five-year reauthorization is not enacted by September 30, Congress will likely adopt a temporary extension of surface transportation funding.

Tariff and Trade Uncertainty

Import tariffs, review of the United States–Mexico–Canada Agreement (USMCA), and other trade policies are generating compliance complexity and uncertainty across North American production networks. How those policies play out will have significant implications for transportation sourcing and investment decisions.

Last year the US imposed new tariffs of 25% and more on motor vehicles and equipment imported to the US, most pursuant to the International Emergency Economic Powers Act (IEEPA). The Administration later agreed to deals with the European Union, Japan, and South Korea that – if the deals hold – would reduce those import duties to 15%. In 2026, the Supreme Court struck down the IEEPA tariffs as beyond presidential authority. The Administration is reported to be working on replacement tariffs using other authorities. Diminished OEM capacity to absorb tariff costs may result in increased new vehicle prices to dealers and consumers already facing vehicle affordability challenges.

This year, the US, Mexico, and Canada will review the USMCA free trade agreement, which governs nearly USD2 trillion in annual trade between the three countries. Prior to the tariffs imposed in 2025, automotive products meeting USMCA requirements could be imported to the US without duties. USMCA and predecessor NAFTA have catalyzed a heavily integrated North American auto manufacturing industry. The 2026 review will determine whether and on what terms the agreement may be extended. Contentious trade relations between the countries, developments in auto technologies and other complications make the outcome of the review uncertain.

Railroads

The proposed merger of Union Pacific and Norfolk Southern – if approved by the federal Surface Transportation Board (STB) – would create the first US transcontinental railroad, Proponents argue the merger could save shippers billions in transportation costs, improve rail service and transit times, enhance competition with motor carriers, and reduce highway congestion.

Some shippers and competitors contend the merger could reduce freight rail competition, increase market power of the combined carrier, and harm some shippers by increasing rail rates and/or leading to a deterioration in service. In the coming months, the STB will conduct a public proceeding to review the proposed merger and determine whether, and under what conditions, the combination would satisfy regulatory requirements of enhancing transportation competition and serving the public interest.