As government EV regulations rise, performance models fall

Posted by Talbot Payne on November 11, 2024

Sonoma, California — Subaru Corp. this fall rolled out its WRX sedan performance lineup for the 2025 model year, and noticeably missing was an updated, $40,000 WRX STI, the Sopwith Camel-winged, 300-plus horsepower hellion. Previous generations of the STI are known for wowing cars ‘n’ coffee gatherings and speeding past more pricey Porsches at track days.

But the latest model couldn’t outrun government regulations.

“In the current regulatory environment, it’s not possible to sell a vehicle with that kind of capability,” Subaru Product Line Manager Chris Charles said at a Subaru media event here. Automakers are facing federal and state fines if their product lineups don’t meet emissions targets.

Under regulatory pressure, the Subaru WRX STI has been discontinued.

Under regulatory pressure, the Subaru WRX STI has been discontinued. Tyler Gourley, Subaru

Not since the 1974 CAFE laws has the U.S. auto industry been under so much government regulatory pressure. Familiar patterns are emerging — Chrysler (now part of Stellantis NV) is in financial duress, regulations have opened the door for low-cost Asian competitors, and low-volume, high-power, internal-combustion-engine enthusiast vehicles are getting the axe.

The incoming Trump administration campaigned on a deregulatory platform to unwind federal emissions mandates aimed at eliminating internal combustion engines sometime in the next decade. But automakers say California — the country’s biggest auto market — is the tail wagging the dog with its stringent Section 177 zero-emission auto sales mandates that zero-out gas and diesel engines by 2035.

Subaru, for example, acknowledged the difficulty of meeting current federal regulations but said the larger concern is so-called Section 177 states that have adopted California’s tough emissions mandates — states including Maine, Massachusetts, New York, Oregon, Vermont and Washington, where foreign makes like Subaru sell well.

Fifty years ago, Detroit muscle cars like the AMC Javelin, Dodge Challenger, Plymouth Barracuda and Pontiac GTO were canceled. Fast forward to today, and once again, popular models like the V8-powered Dodge Challenger, Dodge Charger and Chevy Camaro also have been shelved.

Hemi-V8 powered Dodge products like this Challenger SRT Hellcat Widebody have run afoul of federal emissions regulations and have been discontinued.

Hemi-V8 powered Dodge products like this Challenger SRT Hellcat Widebody have run afoul of federal emissions regulations and have been discontinued.  FCA US LLC, Dodge

This time, it’s not just Detroit performance brands feeling the pain. In addition to Japan’s Subaru STI, European performance icons like the Jaguar F-Type, Audi TT and ICE Porsche 718 are ending production.

“These performance vehicles aren’t coming back, and with regulations in place we don’t expect any model changes until after the 2028 model year,” said Stephanie Brinley, S&P Global associate director of auto intelligence. “Automakers have to meet emissions requirements 18 months before the model year.”

With the support of some automakers, the Trump administration in 2019 revoked California’s exemption from federal law to set its own emissions standards, but the Biden administration immediately reversed it.

With billions in fines looming from the Golden State’s mandates, automakers have been proactive in focusing on EVs while canceling low-volume ICEs. Beginning in 2026, California rules require require 35% of sales to be EV/hydrogen power, though most brands’ EV sales are in the low single digits today. Compliant vehicles earn credits toward meeting the standards, and automakers that don’t have enough credits in a given year must pay fines or buy credits from companies that have extra.

“EVs gain six times more credits in (Section) 177 states than plug-in hybrids,” Garrick Goh, car line manager for Subaru subcompact SUVs, told The Detroit News. “So we’re focusing on EVs like the Solterra.”

Auto analyst Brinley expects the Trump administration will again rescind California’s emissions waiver, but that the state will challenge the move and the rulemaking will become tied up in the courts. She also expects federal rules to be relaxed, but not before the 2028 model year, and that is too late for current-generation engines that are being dropped to meet the emissions regulations.

“Dodge’s Hemi V-8, for example, is gone,” she said, pointing out that automakers are already developing drivetrains for 2028 standards. “It couldn’t meet 2024 standards and no one is talking about retroactively repealing those rules.”

The market shakeout stands to benefit larger automakers, which can better spread regulatory costs. The regulations have driven Subaru into the arms of Toyota Motor Corp., Japan’s biggest automaker, in order to produce its electric Solterra and meet California’s EV sales mandates. But Toyota has also stepped into the ICE performance space vacated by the WRX STI space with its own rowdy GR Corolla, and the Japanese giant now has more affordable sportscars in the U.S. market than Ford Motor Co. and General Motors Co. with the GR Corolla, GR86, and Supra.

“We’ve seen this movie before,” said Karl Brauer, a veteran iSeeCars.com auto analyst and performance car enthusiast. “But in the past, when manufacturers dumped small-volume performance cars, they shifted to a more profitable alternative. What’s different this time is that the regulations are all stick and no carrot. Regulations are killing ICE cars, but EVs are not a profitable alternative.”

To meet tightening international climate standards, Porsche is discontinuing the gas-fired, 718 Cayman sportscar (pictured) and moving to an electric model.

To meet tightening international climate standards, Porsche is discontinuing the gas-fired, 718 Cayman sportscar (pictured) and moving to an electric model. Porsche

Brauer points to Chrysler Corp.’s decision in the early 1980s to ditch V8-fired muscle cars, under pressure from federal gas-mileage laws, and pivot to better-selling fuel-efficient cars based on the front-wheel-drive K chassis. Or struggling GM’s decision in 2002 to discontinue the Camaro and invest in more profitable SUVs.

“Today, EVs are not a better profit alternative for the manufacturer,” Brauer said. “They are losing image and profit by discontinuing these popular models in order to meet regulations.”

Big mainstream automakers like Ford have benefited by moving early on battery-powered versions of popular nameplates to gain EV credits so they can continue to build small-volume, halo ICE products like the V8-powered Mustang. The company says sales of its electric F-150 Lightning and Mustang Mach-E SUV allowed it to introduce popular performance models like the seventh-generation, 2024 V-8-powered Mustang and 2024 V8-powered F-150 Raptor.

“Look at high-volume, big automakers like Ford, GM and VW,” Brauer said. “Their overall mix of low-emission vehicles can be spread out to meet regulations.”

Automakers are experimenting with a new breed of electric performance cars as governments push them toward an all-electric future. But raw speed requires bigger, more expensive batteries and so those models also tend to be focused on affluent buyers — think the $60K-plus Hyundai Ioniq 5 N, Dodge Charger Daytona Banshee and electric Porsche Cayman.

Owners forums are full of speculation on whether affordable pocket rockets like the Subaru STI will be reborn as electric cars. Subaru declines to speculate on future product.

Brauer said affordable electric performance cars are unlikely, given battery expense and weight, which works against the nimble handling that enthusiasts expect. But he is bullish on the future of affordable hybrid performance cars.

“Hybrids hold the potential to keep these ICE nameplates going because their batteries are small and can be focused on performance just like fuel injection brought performance and better fuel economy in the 1970s,” said Brauer. “And they don’t require a lifestyle change to operate the way EVs do. Most performance EVs are owned by affluent, multi-car households. Hybrids can serve all the needs of a single-car-owner enthusiast.”

U.S. government EV regulations have raised concern that they benefit Chinese electric automakers like BYD Auto Co., and the Shenzhen-based automaker made news late last month by overtaking U.S. EV maker Tesla Inc. in quarterly revenue. What got less attention, however, was that the Chinese giant’s growth came from a 76% year-on-year increase in gas-electric hybrid sales to more than half of the company’s 1.1 million vehicle deliveries.

Henry Payne is auto critic for The Detroit News. Find him at hpayne@detroitnews.com or Twitter @HenryEPayne.

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