If you’re on a roadtrip this summer, you have inevitably been encountering a melting pot of different vehicles. Comfy high-riding SUVs, fuel-efficient hybrids, zoomy and environmentally conscious EVs, or your basic sedan are all typical sights when cruising towards your destination. These days, there is very little consistency, with minimal incentive for choosing or producing one type of vehicle over another. A federal regulatory seesaw has created an uncertain landscape for both automakers and the everyday driver. At the University of Maryland’s Department of Agricultural and Resource Economics, Professor Joshua Linn and Associate Professor James Archsmith are studying the policies and market forces driving these changes.
Linn explains that for years, strict federal greenhouse gas mandates and corporate average fuel economy (CAFE) standards were the norm from Washington, which set aggressive penalties for carbon emissions, thereby highly incentivizing electric vehicle production.
But last year, changing federal rules scaled back consumer EV subsidies, greenhouse gas standards were eliminated, and the Department of Transportation weakened the CAFE standards. This has created significant policy whiplash for consumers. Now, they are left guessing which vehicle is the most financially and environmentally responsible choice.
“These policies of old are all gone,” Linn said. “Now it’s more about what the consumer wants.”
In spite of this regulatory 180, automakers have not completely abandoned green technology. They are leaning into hybrids, which combine the comfort and large frame of an SUV with excellent fuel efficiency. Linn notes that they are now outselling EVs two to one.
Still, drivers face deep decision paralysis with sky-high gas prices and the proliferation of energy-intensive data centers, which are driving up electricity prices, forcing buyers to navigate two competing financial realities. Is it cheaper to purchase a gas-powered vehicle and face volatile gasoline prices, or an electric vehicle and deal with an increasingly expensive grid? Archsmith’s research looks at how consumers respond to this type of economic uncertainty.
“Our research shows if you don’t know where the markets are heading, people are using electric vehicles as a hedge and financial shield against potentially high gas prices,” Archsmith said. “Electricity prices are far more reliable and stable than gas.”
Linn has also found that consumer interest in EVs remains.
“EV sales represent around 6% of the nation-wide market share,” Linn explained. “Consumers still like all the benefits they bring, like speed and technology. Just because the incentives are gone doesn’t mean interest will suddenly disappear.”
Looking ahead, both Linn and Archsmith believe that there is not really a predictable future for the auto industry. From a policy standpoint, the 2028 election will be a big year for automakers, where greenhouse gas standards could easily be reinstated. But for now, they are in a bit of a “wait and see” pattern.
“Automakers have taken billions in losses and pulled back from some EV investments, but they aren’t going all in on the no EV world,” Linn said. “We’ve had this political back and forth, and automakers don’t respond. They don’t want to commit too much, preferring to keep their strategies flexible.”
Ultimately, both Archsmith and Linn agree that the intersection of federal policy and consumer choice extends beyond car commercials and the dealership showroom. An electric transition may depend on what happens behind the scenes.
“If a lot of the power is going to be generated by gas and coal, the environmental benefits of switching cars will be smaller,” Linn said. “EVs are only clean to the extent that the electricity sector is clean.”
-Graham Binder
