Ford, GM, Stellantis will benefit from Biden’s emissions regulations

DETROIT — The Biden administration’s decision to shorten the timeline for introducing fully electric vehicles and provides automakers more options to fulfill latest tailpipe emissions standards is anticipated to be a victory for legacy automakers.

New rules from the Environmental Protection Agency released on Wednesday goals to scale back tailpipe emissions by 49% for model years 2027-2032. The EPA has set a goal for electric vehicles to catch up at the least 35% sales of recent vehicles by 2032

The standards are less ambitious than proposed rules published last 12 months, which aimed to scale back emissions by 56% by 2032 and called for electric vehicles to account for 67% of recent vehicles by that 12 months.

Lower expectations for electric vehicle adoption are as a result of slower-than-expected sales of the vehicles, which may cost tens of 1000’s of dollars greater than their traditional gasoline-powered counterparts.

The EPA’s latest strategy to scale back tailpipe emissions doesn’t just deal with electric vehicles. It includes more efficient petrol engines, hybrids and plug-in hybrid electric vehicles.

EPA’s EV adoption percentage goals are usually not mandates, but expectations for a way automakers can meet emissions regulations. The goal range for the market share of electrical vehicle sales in 2032 is within the range of 35-56%.

The EPA said the standards would avoid greater than 7 billion tons of carbon dioxide emissions and supply nearly $100 billion in annual net advantages to society. It said they include $13 billion in annual public health advantages from improved air quality, in addition to $62 billion in reduced annual fuel costs and maintenance and repair costs for drivers.

Here are some key takeaways on what the brand new guidelines mean for carmakers, investors and the environment.

Automotive officials and Wall Street analysts are praising the revised rules as a significant victory for legacy automakers, particularly Detroit’s legacy automakers General Motors, Ford engine and parent of Chrysler Stellarthat largely profit from large SUVs and trucks.

“We see this change as a positive for traditional U.S. automakers as the new regulations put less pressure on them to increase production of electric vehicles in the near future and could even potentially enable them to further reduce capital expenditure and R&D for electric vehicles” – Emmanuel , Deutsche Bank analyst Rosner said in a note to investors on Thursday.

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

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

The latest rules are also a victory for the Detroit-based United Auto Workers union, which has raised concerns concerning the impact on jobs of switching from internal combustion engines to electric vehicles.

“By taking the concerns of workers and communities seriously, EPA has created more enforceable emissions regulations that protect workers’ buildings [internal combustion engine] vehicles, while providing a pathway for automakers to implement a full range of automotive technologies to reduce emissions,” the UAW said in a statement.

Shares for Detroit automakers, as well as others, such as the American leader in hybrid vehicles Toyota engineit closed on Wednesday after the announcement.

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

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

Martin Viecha, vice president for investor relations of the largest American manufacturer of electric vehicles, Teslaagreed in a post on X: “Unfortunately, people use plug-in hybrids mainly as gas cars, which means their CO2 emissions are much worse than the official EPA or WLTP ratings suggest.”

“Just as official energy consumption estimates for electric vehicles are becoming closer to reality, the same should be done for plug-in hybrids,” he added.

The environmental group Sierra Club, which has condemned automakers equivalent to Toyota for counting on hybrids, broke with previous statements and praised the standards. The organization, which has endorsed President Joe Biden’s re-election bid, said the brand new rules are “one of the crucial essential actions his administration can take to combat climate change.”

Several Wall Street experts and analysts were quick to notice that the brand new standards could help Biden with certain groups in his re-election campaign.

“We suspect this slight leniency will calm lobbying on behalf of automakers – and more specifically, auto industry unions – who understandably perceive aggressive efforts (e.g., a threat to their jobs in conventional car factories,” Chris said in a note to investors Kapsch, Loop Capital analyst.

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

This move could help the president The UAW, which supported Biden’s re-election bid in January. It could also be designed to strengthen its position in Michigan – home to GM, Ford and many other suppliers – which is expected to play a key role as a swing state in this year’s presidential election.

Tailpipe emissions regulations are just one part of the federal government’s policy to make vehicles more efficient.

Automakers are still awaiting Corporate Average Fuel Economy (CAFE) standards developed by the National Highway Traffic Safety Administration, part of the Department of Transportation, for model year 2027 through 2032 vehicles.

CAFE standards govern the distance vehicles must travel on a gallon of fuel. NHTSA in 2023 proposed a fleet-wide average of approximately 58 miles per gallon for passenger cars and light trucks for the 2032 model year by increasing fuel economy by 2% per year for passenger cars and by 4% per year for light trucks.

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

There is also the California Air Resources Board, which can set its own emissions and fuel economy standards – powers that former President Donald Trump tried to take away.

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

“As we review the details, we encourage the U.S. federal government to continue to coordinate with the California Air Resources Board to ensure the auto industry successfully transitions to electrification,” GM said in an announcement.

— CNBC Michael Bloom contributed to this report.