US Auto Sector Braces for Upheaval on California's EV Target

In a landmark judgement to combat climate crisis, California mandated that more than half of all the trucks and vans sold in the state should be emission free by 2035. One of the leading economies in the world, California has always been steadfast in pursuing policies to tackle global warming and come up with some of the most aggressive climate policies. It is again leading the nation in the fight to become carbon neutral by issuing the order that all new trucks sold in the state should be zero-emissions by 2045.

California at the Forefront to Fight Climate Change

In one of the toughest clean-air mandates on trucks approved by the California Air Resources Board on Thursday, the state requires automakers to sell more electric trucks — including heavy duty pickups — effective 2024. The latest mandate aims to drive the state toward the ambitious greenhouse gas reduction targets — 40% below 1990 levels by 2030 and 80% down within 2050. California aims to generate 60% electricity from solar, wind and other zero-carbon sources by 2030 and 100% within 2045.

Brushing off opposition from many industries including oil and gas, agriculture and trucking that view the move as regulatory overreach, California has been firm in efforts to control greenhouse gas emissions, reduce dependence on oil and improve air quality. Per the new regulations, the state is in opposition to the Trump administration, which announced the rollback of Obama-era vehicle fuel efficiency standards in March. According the Obama-era rules, automakers were to achieve 5% annual increase in fuel efficiency each year through 2026. The new rules by Trump would require just 1.5% annual increase in efficiency through 2026. California had led a regulatory revolt against the rollback of emission standards and still stands its ground by vowing to stricter environmental regulations.

Notably, transportation contributes to 40% of California’s greenhouse gas emissions. Abandonment of diesel trucks will not only help the state become carbon neutral but also shake up the auto industry further and help California become a hub for the electric truck manufacturing industry.

Electric Pickup Game Gathers Steam

Let’s take a look at the companies that are stepping up efforts on the electric pickup race. All major truck manufacturers including Daimler AG DDAIF, PACCAR PCAR and Navistar NAV are focused on manufacturing electric trucks powered by batteries or hydrogen electric fuel cells.

Daimler AG, which had delivered the first few electric Freightliner trucks in 2019 as part of customer testing in North America, announced in March that it delivered more electric Freightliner semi-trucks as part of its customer test fleet. The Freightliner eCascadia, with a range of 250 miles on a single recharge, is a Class 8 electric trailer.

Last year, Amazon AMZN announced plans to buy 100,000 electric trucks from Rivian, a manufacturing start-up. Arguably, the most anticipated pickup, Tesla TSLA Cybertruck is insanely futuristic with a radical design and spectacular specs. Tesla currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hydrogen-truck upstart Nikola is set to give a tough competition to Tesla. It should be noted that by 2027, Nikola anticipates a production of 30,000 fuel cell electric vehicle trucks.

U.S. top auto giant General Motor’s GM decision to re-introduce Hummer as an electric-model has taken the industry by surprise. U.S. #2 automaker Ford F is developing an all-electric version of F-150, the nation’s best-selling pickup. The company made headlines when it released a video last summer to demonstrate the pickup’s remarkable towing capacity. The electric F-150 prototype was seen pulling 10 double-decker rail cars filled with 42 F-150 pickups, weighing nearly 1 million pound. Startups like Rivian, Bollinger and Lordstown are entering the market alongside stalwarts like Tesla, Ford and General Motors.

Last Words

The Truck and Engine Manufacturers Association has opposed California’s mandate citing inadequate funding and charging infrastructure. Shift from internal combustion engine to electrification requires heavy investment and at a time when the industry is already reeling under financial crisis amid coronavirus woes, they view California’s electric truck targets less plausible. While there is much opposition by the industry groups, there are a number of automakers who have been taking the EV plans seriously. Many of the automakers have already announced ambitious plans to manufacture electric trucks and vans. The latest move is likely to encourage more companies to further emphasize on the future of e-mobility.

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Click to get this free report Ford Motor Company (F) : Free Stock Analysis Report Navistar International Corporation (NAV) : Free Stock Analysis Report PACCAR Inc. (PCAR) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report General Motors Company (GM) : Free Stock Analysis Report Daimler AG (DDAIF) : Free Stock Analysis Report Tesla, Inc. (TSLA) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research