Remember me saying months ago that the Stellantis CEO needed to be fired? Well, that was true, and this was BEFORE this news came out!
Most major automakers are gaining regulatory breathing room following the rollback of California’s latest zero-emission vehicle rules, Stellantis remains locked into one of the toughest compliance tracks in the nation. A 2024 settlement agreement between the automaker and the California Air Resources Board (CARB) ensures the company must continue meeting the state’s phased EV sales targets through at least the 2030 model year—regardless of whether those rules are enforceable for others. Let that sink in. Every other automaker has less restrictive rules on making the ice cold electrics nobody wants.
The agreement, signed under former CEO Carlos Tavares, was crafted to resolve past emissions noncompliance issues between Stellantis and CARB. In exchange for avoiding litigation and regulatory penalties, Stellantis agreed to a forward-looking commitment to meet California’s evolving electric vehicle mandates, even in the event that the federal government rescinded California’s waiver to impose its own emissions standards. How stupid was that?
That exemption, granted under the Clean Air Act, allowed California to enforce stricter emissions rules than the federal government. But in May 2025, Congress passed, and President Donald Trump signed, legislation that stripped away that authority, nullifying the Advanced Clean Cars II (ACC II) regulations for most automakers. Those rules would have required 100% of new vehicles sold in California to be zero-emission by 2035, with interim targets starting at 35% in 2026 and climbing to 68% by 2030.
Stellantis, however, remains on the hook for that schedule due to its binding deal. The company must now ramp up sales of battery-electric and fuel cell vehicles in California to meet those benchmarks—an especially steep climb given Stellantis’ historically limited EV portfolio in the U.S. AND the fact that nobody wants them.
In 2024, Stellantis sold only one fully electric model—the Fiat 500e—which moved just 531 units nationwide. It added two more EVs to the lineup in early 2025: the Dodge Charger Daytona and the Jeep Wagoneer S. Even with these additions, Stellantis’ EV sales accounted for less than 2% of its U.S. volume in the first quarter of 2025. Plug-in hybrids, of which Stellantis sold over 100,000 units in 2024, provided some regulatory relief, but made up less than 8% of its total sales.
The company’s obligations under the settlement apply only to California and not the dozen other states that had adopted its emissions standards. In those states, Stellantis only pledged to make a reasonable effort to sell as many EVs as feasible, leaving the strictest enforcement concentrated in a single but critical market. California accounts for roughly 13% of U.S. new vehicle sales and plays an outsized role in national emissions policy.
The original rationale behind the settlement was to avoid the disadvantages Stellantis faced compared to five other automakers—Ford, Honda, BMW, Volkswagen, and Volvo—that reached separate emissions compliance agreements with California beginning in 2019. Stellantis argued it had been excluded from those talks and claimed that the state’s requirements, if enforced unevenly, could lead to job losses at key manufacturing plants in Detroit and Toledo. The 2024 agreement helped level the playing field temporarily by reducing Stellantis’ emissions burden in the short term in exchange for long-term compliance with tougher EV sales targets.
The settlement included several non-sales-related requirements. Stellantis agreed to reduce its greenhouse gas emissions by over 10 million tons through 2026, fund public outreach campaigns to support EV adoption, and invest $10 million in installing EV charging infrastructure in state and national parks across California. Importantly, the company agreed not to contest or undermine the agreement in any legal forum. What sober CEO would agree to this?
Now, with ACC II regulations effectively nullified for most of the market, Stellantis finds itself uniquely constrained. The EV mandates it agreed to meet—once seen as a strategic trade-off—now appear increasingly burdensome. Competing automakers no longer face the same pressure to meet those targets in California, making it easier for them to rebalance their portfolios in response to softening EV demand and infrastructure limitations. Talk about Stellantis being at a disadvantage.
Analysts have noted that Stellantis could theoretically offset some of its shortfalls by purchasing ZEV credits from other automakers, a long-standing practice in emissions compliance. However, the viability of that option is now in question. With California’s enforcement authority scaled back and demand for credits waning, the market for such credits may shrink or collapse altogether. If credit trading remains allowed under the terms of the 2024 settlement, Stellantis may be able to buy its way to compliance—but at uncertain cost and reliability.
The automaker’s California dealers are also watching the situation closely. Without a level regulatory field, Stellantis-branded stores could struggle to compete if they are required to sell higher volumes of EVs than their rivals. California’s EV infrastructure remains uneven, and customer adoption is still concentrated among wealthier, home-owning demographics, adding to the difficulty of meeting the required sales ratios.
State enforcement may also play a decisive role. While CARB has indicated it expects Stellantis to comply with the terms of its agreement, questions remain about what penalties the company might face if it fails to meet the escalating ZEV thresholds. Under California contract law, CARB could potentially sue for noncompliance, opening a new chapter of legal and financial risk for the automaker.
California officials are already looking ahead. On June 12, Governor Gavin Newsom signed an executive order reinforcing the state’s EV transition goals, instructing CARB to publish data on automaker compliance and begin work on a next-generation rule set, dubbed ACC III. While the exact future of those rules remains unclear under the current federal climate, California appears determined to maintain pressure on automakers to cut emissions and grow EV sales, even in a legally constrained environment and ignoring the fact that the public has largely shunned EVs.
For Stellantis, the path forward will require either a rapid expansion of its electric lineup or new regulatory accommodations. With most of the industry now facing fewer constraints in California, Stellantis’ decision to settle may have bought short-term relief but left the company alone in navigating a long-term regulatory commitment that’s increasingly difficult—and costly—to uphold.
I reached out to Stellantis for a comment and a spokesperson replied: “Stellantis continues to honor its agreement with CARB.”
Photo Credit: Stellantis.
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