What investors should know about the U.S. easing vehicle emissions rules

DETROIT
—
The
Biden
administration’s
decision

to
ease
its
timeline
for
all-electric
vehicle
adoption
and
give
automakers
more
ways
to
meet
new
tailpipe
emissions
standards
is
expected
to
be
a
win
for
legacy
automakers.

The
new
Environmental
Protection
Agency
rules

released
Wednesday
aim
to
cut
tailpipe
emissions
by
49%
between
model
years
2027
and
2032.
The
EPA
set
a
target
for
EVs
to
make
up
at
least
35%
of
new
vehicle
sales
by
2032.

The
standards
are
less
ambitious
than
proposed
rules
released
last
year,
which
targeted
a
56%
reduction
in
emissions
by
2032
and
called
for
EVs
to
represent
67%
of
new
vehicles
by
that
year.

The
lower
expectation
for
EV
adoption
comes
amid

slower-than-expected
sales
of
the
vehicles,
which
can
cost
tens
of
thousands
of
dollars
more
than
their
traditional
gas
counterparts.

The
EPA’s
new
strategy
for
cutting
tailpipe
emissions
doesn’t
focus
only
on
EVs.
It
took
into
account
more
efficient
gasoline
engines,
hybrids
and
plug-in
hybrid
electric
vehicles.

The
EPA’s
percentage
targets
for
EV
adoption
are
not
mandates
but
expectations
for
how
automakers
could
meet
the
emissions
regulations.
The
target
range
for
the
share
of
EV
sales
in
the
market
in
2032
is
between
35%
and
56%.

The
EPA
said
the
standards
will
avoid
more
than
7
billion
tons
of
carbon
emissions
and
provide
nearly
$100
billion
of
annual
net
benefits
to
society.
It
said
those
include
$13
billion
of
annual
public
health
benefits
due
to
improved
air
quality,
along
with
$62
billion
in
reduced
annual
fuel
costs
and
maintenance
and
repair
costs
for
drivers.

Here
are
some
key
takeaways
about
what
the
new
guidelines
mean
for
automakers,
investors
and
the
environment.

Automotive
officials
and
Wall
Street
analysts
are
touting
the
altered
rules
as
a
major
win
for
legacy
automakers,
specifically
the
traditional
Detroit
automakers


General
Motors,


Ford
Motor
and
Chrysler
parent


Stellantis,
which
largely
rely
on
big
SUVs
and
trucks
to
make
profits.

“We
view
this
development
as
positive
for
traditional
US
automakers,
since
the
new
rules
put
less
pressure
on
them
to
ramp
up
EV
production
in
the
near
term,
and
could
even
potentially
enable
them
to
reduce
further
EV
capex
and
R&D,”
Deutsche
Bank
analyst
Emmanuel
Rosner
said
Thursday
in
an
investor
note.

John
Bozzella,
president
and
CEO
of
the
Alliance
for
Automotive
Innovation,
a
lobbying
group
that
represents
most
automakers
in
the
U.S.,
agreed.

“Moderating
the
pace
of
EV
adoption
in
2027,
2028,
2029
and
2030
was
the
right
call
because
it
prioritizes
more
reasonable
electrification
targets
in
the
next
few
(very
critical)
years
of
the
EV
transition,”
he
said.

The
new
rules
also
are
a
victory
for
the
Detroit-based
United
Auto
Workers
union,
which
has
raised
concerns
about
how
the
transition
from
internal
combustion
engines
to
EVs
could
affect
jobs.

“By
taking
seriously
the
concerns
of
workers
and
communities,
the
EPA
has
created
a
more
feasible
emissions
rule
that
protects
workers
building
[internal
combustion
engine]
vehicles,
while
providing
a
path
forward
for
automakers
to
implement
the
full
range
of
automotive
technologies
to
reduce
emissions,”
the

UAW
said
in
a
statement.

Stocks
for
the
Detroit
automakers,
as
well
as
others
such
as
U.S.
hybrid
leader


Toyota
Motor,
closed
higher
Wednesday
following
the
announcement.

While
the
new
standards
sparked
relief
in
Detroit,
others
weren’t
too
pleased.

The
new
rule
“falls
far
short
of
what
is
needed
to
protect
public
health
and
our
planet.
EPA
is
giving
automakers
a
pass
to
continue
producing
polluting
vehicles,”
said
Chelsea
Hodgkins,
senior
policy
advocate
at
left-leaning
consumer
rights
group
Public
Citizen.

Martin
Viecha,
vice
president
of
investor
relations
for
the
biggest
U.S.
EV
maker,


Tesla,
agreed
in
a
post
on
X:
“Unfortunately,
people
use
plug-in
hybrids
mainly
as
gas
cars,
which
means
their
CO2
emissions
are
far
worse
than
official
EPA
or
WLTP
ratings
suggest.”

“Just
like
officially
rated
energy
consumption
of
EVs
has
been
getting
closer
and
closer
to
reality,
same
should
be
done
for
plug-in
hybrids,”
he
added.

Environmental
group
Sierra
Club,
which
has

condemned
automakers
such
as
Toyota
for
their
reliance
on
hybrids,
broke
with
past
statements
and
hailed
the
standards.
The
organization,
which
endorsed
President
Joe
Biden
for
reelection,
said
the
new
rules
are
“one
of
the
most
significant
actions
his
administration
can
take
on
climate
change.”

Several
experts
and
Wall
Street
analysts
were
quick
to
point
out
that
the
new
standards
could
help
Biden
with
some
groups
in
his
reelection
campaign.

“We
surmise
this
slight
leniency
appeases
to
lobbying
on
behalf
of
automakers
—
or
more
pointedly,
the
auto
unions
—
which
have
understandably
viewed
the
aggressive
efforts
(e.g.,
the
IRA
bill
turned
law)
by
the
Biden
administration
to
‘electrify’
the
auto
industry
as
a
threat
to
their
jobs
in
conventional
auto
manufacturing
plants,”
Loop
Capital
analyst
Chris
Kapsch
said
in
an
investor
note.

Morgan
Stanley
analyst
Adam
Jonas
agreed
in
a
separate
note:
“The
delay
and
flexibility
baked
into
the
new
timeline
could
be
part
of
an
effort
to
appease
the
UAW,
a
key
Democratic
constituency
historically
concerned
about
the
rise
of
EVs.”

The
move
could
help
the
president
with
the
UAW,
which

endorsed
Biden
for
reelection
in
January.
It
could
also
be
designed
to
boost
him
in
Michigan
—
home
of
GM,
Ford
and
many
other
suppliers
—
which
is
expected
to
play
a
pivotal
role
as
a
swing
state
in
this
year’s
presidential
election.

The
tailpipe
emissions
regulations
are
only
one
part
of
the
federal
government’s
policies
that
aim
to
boost
the
efficiency
of
vehicles.

Automakers
are
still
awaiting
the
“Corporate
Average
Fuel
Economy,”
or
CAFE,
standards
from
the
National
Highway
Traffic
Safety
Administration,
a
part
of
the
Department
of
Transportation,
for
2027
to
2032
model-year
vehicles.

CAFE
standards
set
out
to
regulate
how
far
vehicles
must
travel
on
a
gallon
of
fuel.
NHTSA
in
2023
proposed
an
industry
fleet-wide
average
of
approximately
58
miles
per
gallon
for
passenger
cars
and
light
trucks
in
model
year
2032,
by
increasing
fuel
economy
by
2%
per
year
for
passenger
cars
and
by
4%
annually
for
light
trucks.

The
CAFE
standards
are
expected
to
be
finalized
later
this
year.

There’s
also
the
California
Air
Resources
Board,
which
can
set
its
own
standards
for
emissions
and
fuel
economy
–
a
power
former
President
Donald
Trump
attempted
to
take
away.

For
years,
automakers
such
as
GM
have
argued
there
should
be
one
national
standard
for
fuel
economy
and
greenhouse
gas
emissions
to
help
them
plan
and
make
it
easier
to
comply.

“While
we
review
the
details,
we
encourage
continued
coordination
across
the
U.S.
federal
government
and
with
the
California
Air
Resources
Board
to
ensure
the
auto
industry
can
successfully
transition
to
electrification,”
GM
said
in
a
statement.

—
CNBC’s


Michael
Bloom

contributed
to
this
report.