New Vehicle Emissions Rules Are Good for Ford, GM, and Tesla

The rules are more sensible. And that can depoliticize, to some extent, the decarbonization of personal transportation.

The rules require carbon emissions from new vehicles in 2032 to be about half as much as those that go on sale in 2026. The prior proposal called for a reduction of about 65%.

The Environmental Protection Agency estimates that the standards will provide $100 billion in annual net benefits, including $13 billion in public health gains from improved air quality, and $62 billion in reduced annual fuel costs, maintenance, and repair costs for drivers.

Selling zero-emissions cars—or battery-electric vehicles—is one way to hit emissions standards. Investors sometimes think of the standards as an indication of what share of new-vehicle sales BEVs would comprise. Under the new rules, roughly half of the light vehicles sold in the U.S. need to be all-electric by 2032, down from the prior goal of two-thirds.

That’s a significant cut. Tesla stock, however, was up 2.6% in late trading, seemingly unaffected by the cut.

Half still implies a lot of growth. Annual BEV sales would grow from roughly one million a year to nine million by 2032. That is an annual increase of about 28% between 2023 and 2032. While the old goal implied a rate of about 32%, both rates look good.

Ford and GM shares are getting a bigger bump. The Detroit auto makers, of course, have traditional car businesses that will sell more gas-powered cars for longer, while also having more time to develop profitable EVs. Ford stock was up 4.9% in midday trading. GM stock was up 2.8%. The

S&P 500

and

Nasdaq Composite

were up 0.9% and 1.2%, respectively. The market, and many stocks, got a boost after the Federal Reserve rate decision and commentary that still implied three interest rate cuts in 2024.

Some of that boost might also be cooperation—the new EPA rule seems to have a broader base of support, which is a positive for everyone in the car business.

“Auto makers are committed to the [EV] transformation,” said John Bozzella, CEO of the Alliance for Automotive Innovation, at the EPA news conference, adding that commitment alone couldn’t overcome practical hurdles such as charging infrastructure, choppy EV sales trends, the development of the EV supply chain, and consumer choice.

Going slower seems sensible, but EVs are still coming. “The future is electric,” said Bozzella.

“GM supports the goals of the EPA’s final rule and its intention to significantly reduce emissions,” said GM in an emailed statement. “Our commitments and investments in an all-electric future place GM in an excellent position to contribute to the goals. 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.”

Ford added in an emailed statement, “We appreciate EPA’s efforts and collaboration in strengthening greenhouse gas emissions standards in ways that reflect the realities of the EV transition…Ford will continue to lower emissions while offering our customers choices across hybrid, plug-in hybrid, and fully electric vehicles.”

The United Auto Workers endorsed the new rule as well. ”The EPA has made significant progress on its final greenhouse gas emissions rule for light-duty vehicles,” the union said in a news release. “By taking seriously the concerns of workers and communities, the EPA has come a long way to create a more feasible emissions rule that protects workers building ICE vehicles, while providing a path forward for auto makers to implement the full range of automotive technologies to reduce emissions. ”

The Biden administration’s messaging appears to have changed a little. Along with environmental benefits, there was a focus on energy independence and jobs.

The rule is “massive news for consumers,“ said Ali Zaidi, President Joe Biden’s national climate advisor. “For the first time, we are breaking the monopoly that the [oil industry] had on how we get from point A to point B…you have choices now.”

EPA Administrator Michael Regan said the standards would slash seven billion tons of climate pollution, improve air quality, and give drivers more clean-vehicle choices, and save them money. “This administration is pairing strong standards with historic investments to revitalize domestic manufacturing, strengthen domestic supply chains, and create good-paying jobs,” he said.

Overall, auto makers have announced some $160 billion in new EV technology investments over the past four years. About 100,000 new automotive manufacturing jobs have already been created.

The importance of broad-based support shouldn’t be underestimated. A 2023 survey from Pew Research found that EVs are polarizing politically. About 25% of survey respondents looking for a new car who lean Republican will consider an EV. The number for Democratic-leaning respondents was about 65%.

”Doing good for the environment is also good business,” says

Vontier

CEO Mark Morelli. His company sells solutions across the transportation landscape including gas stations, vehicle fleet operators, and EV charging networks. ”The things that are right in one area or one region may not necessarily be right in another area or region, but everyone is on a constructive path.”

In the coming days, Wall Street analysts will pore over the new standards—the final rule is more than 1,100 pages long—looking for details and adjusting long-term forecasts. For now, the market has voted. It’s happy with the adjusted rule.

Write to Liz Moyer at liz.moyer@barrons.com, Janet H. Cho at janet.cho@dowjones.com and Al Root at allen.root@dowjones.com