The Trump administration's momentum in overhauling US energy policy appears unhindered by the Iran conflict or midterm election dynamics. In a recent Michigan event, US Transportation Secretary Sean Duffy announced that the government will significantly relax vehicle fuel efficiency standards, aiming to establish "common-sense fuel economy rules." Duffy explained that the administration wants Detroit to build cars Americans genuinely desire, rather than having Washington dictate manufacturing decisions.

This signals that the proposal from the National Highway Traffic Safety Administration is set to become the new benchmark. Under this plan, the average fuel efficiency standard would drop to 14.7 kilometers per liter by 2031, far below the 21.4 kilometers per liter target set during former President Biden's tenure. It's worth revisiting Biden's approach, which mirrored strategies in countries like China by focusing on cutting greenhouse gas emissions, reducing fossil fuel reliance, speeding up the clean energy transition, and promoting electric vehicles. Biden's framework called for an 8% annual fuel efficiency improvement for 2024 and 2025 models, a 10% jump for 2026, and a 2% annual rise from 2027 through 2031.

The newly proposed standards are relatively easy for automakers like Ford, General Motors, and Stellantis to meet with their current lineups. This move is expected to slash production costs, lower vehicle prices, and boost commercial competitiveness. Estimates suggest the new rules could cut the average purchase price of a new car by $930.

The revised fuel efficiency standards are just one component of the broader energy policy reversal under Trump. In 2025, Congress decided to scrap penalties for automakers failing to meet targets, eliminated the $7,500 tax credit for EV buyers, and revoked California's authorization to ban traditional fuel vehicle sales by 2035. These adjustments strike at the heart of the ESG movement—which has long championed environmental protection and social responsibility alongside corporate governance—marking its undeniable retreat across the US.

Whether China will stay the course on its own energy policy or potentially pivot remains unclear, but several policy trends deserve attention. It's plausible that, akin to the recalibration seen in the real estate sector, a window for adjusting China's energy policy could open in the not-too-distant future.

First, the photovoltaic industry, once celebrated as a model of "China's manufacturing upgrade" and "new energy development," has slid into systemic crisis amid severe overcapacity, uncontrolled price wars, and soaring raw material costs. In recent years, central and state-owned enterprises have frequently sold off new energy assets like solar and wind power projects, making this a key focus of optimizing industrial layouts. Back in 2022, the sector enjoyed robust profits across the board, but within just four years, it has swung dramatically from peak to trough. Annual reports from listed PV companies for 2025 show that the entire chain—from upstream polysilicon to downstream modules, equipment makers to auxiliary materials suppliers—has collectively fallen into losses. Interim reports for 2026 indicate the situation has worsened rather than improved. Consequently, multiple state-owned enterprises have transferred new energy assets from dozens of subsidiaries. Policy shifts, from subsidy phase-outs to grid parity and free competition in the spot electricity market, have turned wind and solar projects from "cash cows" into "hot potatoes," prompting mass divestment by both state-owned and private firms.

Second, China's auto market, spanning both conventional fuel vehicles and new energy vehicles (NEVs), is contracting sharply, with numerous automakers incurring losses or teetering on the brink of bankruptcy. The industry faces a stark "go global or get left behind" reality. Statistics show that in April 2026, domestic retail sales of conventional fuel vehicles fell to just 530,000 units, a 37% year-on-year plunge and a further 33% drop from March. The NEV market is also showing signs of fatigue, with April retail sales of passenger NEVs at 849,000 units, down 6.8% year-on-year and 0.3% from March. Cumulative retail sales from January to April reached 2.758 million units, a 17.2% decline year-on-year. For 2025, financial reports from eight listed auto dealer groups reveal that seven posted losses, with only one barely breaking even. Industry leader Zhongsheng Group generated around RMB 164.4 billion in revenue but suffered a net loss of RMB 1.673 billion. Yongda Auto swung from a profit to a loss exceeding RMB 300 million, while Zhengtong Auto saw its losses widen to RMB 2.49 billion. According to the China Automobile Dealers Association, 55.7% of the nation's 4S dealerships were loss-making in 2025, with only 23.5% profitable and 20.8% breaking even. Additionally, 81.9% of dealers faced price inversions on new cars, with over half experiencing markdowns exceeding 15%. China's total auto production capacity now stands at 47.5 million vehicles, against a supply-demand gap of over 13 million, meaning nearly three out of every ten units of capacity sit idle. In Q2 2026, capacity utilization in the auto manufacturing sector slipped to 70.8%, below the 75% healthy threshold.

Given this backdrop, bankruptcies among automakers are nearly inevitable. According to Like Consulting, 23 NEV companies had entered judicial bankruptcy, liquidation, or effectively ceased operations by May 2026. Neta Auto, which once sold 152,000 vehicles annually and clinched the top spot among new forces in 2022, went from champion to bankruptcy in just three years. Exports initially offered a lifeline, with China's auto export volumes growing by roughly one million units annually starting in 2021, when the country overtook Germany and Japan to become the world's largest auto exporter. With a weak domestic market, going overseas has become the sole survival strategy for many automakers, fueling the adage "no exports, no exit." Now, as US energy policy shifts bolster the competitiveness of American automakers, a harsh reality confronts Chinese exporters: how much of their competitive edge truly remains?

I've noted that in July 2026, the Ministry of Finance, General Administration of Customs, and State Taxation Administration issued a notice on adjusting consumption tax policies for certain batteries. It stipulates that lithium-ion batteries (like those in EVs, laptops, and smartphones) and photovoltaic cells (such as rooftop solar panels), previously exempt from consumption tax, will gradually have the tax reinstated over the next ten months, transitioning from a 2% preferential rate to a 4% standard rate. Whether this signals an impending adjustment in China's energy policy warrants close observation.