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Toyota (TM) Gives Consent to California's Own Emission Standards
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In a major breakthrough, Toyota Motor Corporation (TM - Free Report) has acknowledged California’s authority to set its own auto emission standards under the U.S. Clean Air Act. This ends a stalemate that dates back to the Trump administration.
On Aug 23, the automaker accepted the California Air Resources Board’s command in climate policies. It stated that it is eager to partake in the shared vision of greenhouse gas reduction and carbon neutrality with the California Air Resources Board and the State of California.
The move is somewhat surprising as the company had sided with the Trump administration in 2019, that moved courts to roll back existing mileage rules and revoke California’s right to establish its own emission standards. The decision shocked consumers because Toyota had always championed clean-car manufacturing. Some even went on to stop purchasing the company’s vehicles. Toyota’s peer, General Motors Co. (GM - Free Report) was also part of the 2019 lawsuit challenging the state. However, General Motors later changed its stance and backed off from the suit shortly before pledging to sell only zero-emission vehicles by 2035.
After the unpopular policy by Trump, the Environmental Protection Agency, in March, reinstated the state’s right via a waiver under the Clean Air Act that was awarded to California in 2013. Seventeen U.S. states have agreed to adopt the state’s tailpipe emissions rules and 15 will adopt its zero-emission vehicle requirements. California targets to ban the sale of new gas-powered passenger cars starting in 2035.
The Biden administration has been quite active and keen in electrification efforts in the country and has ordered carmakers to increase their average fuel economy to about 49 miles per gallon by 2026. The ambitious effort has won support from carmakers. Therefore, Toyota’s statement, although contrary to its 2019 stance, will probably assure consumers that it is not the odd player in the country’s united electrification drive.
The announcement to support the state’s emissions standards follows suit as the California Air Resources Board is about to adopt new standards this week. Upon success, the regulations will pass on to the Environmental Protection Agency for approval.
Moreover, the Inflation Reduction Act, which was recently signed into law, provides incentives for the adoption of multiple sources of clean energy, including energy storage, nuclear power and clean energy vehicles, as long as they are carbon neutral. Undoubtedly, this recent law has led automakers to scramble for onshore production of electric vehicles and batteries to qualify for the incentives.
Under the bill's clause, the government has committed a $369 billion investment earmarked for clean energy and climate change mitigation initiatives. This is a singular level of support pledged by the U.S. federal government to promote and transition to sustainable energy. It is one of the most significant climate bills ever passed in the country to inhibit its greenhouse gas emissions to nearly 40% by 2030 compared to 2005-levels, over the next few years.
Toyota is determined in its electrification efforts. Last year it announced investments totaling $5.1 billion to bolster its electrification drive in the country, which also covered battery production. It has also pledged around $473 million this year to support the production of hybrid-electric powertrains and engine capacity. So, it is natural that the incentives from the Inflation Reduction Act and the benefits arising from siding with the state will aid the company. Also, the company’s acceptance of California’s authority might make it eligible for fleet purchases by the state.
Shares of TM have lost 10.3% over the past year compared with its industry’s 29.2% decline.
Harley-Davidson has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 8.5% upward in the past 30 days.
Harley-Davidson’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. HOG pulled off a trailing four-quarter earnings surprise of 49.52%, on average. The stock has risen 0.2% in the past year.
LCI Industries has an expected earnings growth rate of 68.1% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 1.3% upward in the past 30 days.
LCI Industries’ earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. LCII pulled off a trailing four-quarter earnings surprise of 26.48%, on average. The stock has declined 10.6% over the past year.
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Toyota (TM) Gives Consent to California's Own Emission Standards
In a major breakthrough, Toyota Motor Corporation (TM - Free Report) has acknowledged California’s authority to set its own auto emission standards under the U.S. Clean Air Act. This ends a stalemate that dates back to the Trump administration.
On Aug 23, the automaker accepted the California Air Resources Board’s command in climate policies. It stated that it is eager to partake in the shared vision of greenhouse gas reduction and carbon neutrality with the California Air Resources Board and the State of California.
The move is somewhat surprising as the company had sided with the Trump administration in 2019, that moved courts to roll back existing mileage rules and revoke California’s right to establish its own emission standards. The decision shocked consumers because Toyota had always championed clean-car manufacturing. Some even went on to stop purchasing the company’s vehicles. Toyota’s peer, General Motors Co. (GM - Free Report) was also part of the 2019 lawsuit challenging the state. However, General Motors later changed its stance and backed off from the suit shortly before pledging to sell only zero-emission vehicles by 2035.
After the unpopular policy by Trump, the Environmental Protection Agency, in March, reinstated the state’s right via a waiver under the Clean Air Act that was awarded to California in 2013. Seventeen U.S. states have agreed to adopt the state’s tailpipe emissions rules and 15 will adopt its zero-emission vehicle requirements. California targets to ban the sale of new gas-powered passenger cars starting in 2035.
The Biden administration has been quite active and keen in electrification efforts in the country and has ordered carmakers to increase their average fuel economy to about 49 miles per gallon by 2026. The ambitious effort has won support from carmakers. Therefore, Toyota’s statement, although contrary to its 2019 stance, will probably assure consumers that it is not the odd player in the country’s united electrification drive.
The announcement to support the state’s emissions standards follows suit as the California Air Resources Board is about to adopt new standards this week. Upon success, the regulations will pass on to the Environmental Protection Agency for approval.
Moreover, the Inflation Reduction Act, which was recently signed into law, provides incentives for the adoption of multiple sources of clean energy, including energy storage, nuclear power and clean energy vehicles, as long as they are carbon neutral. Undoubtedly, this recent law has led automakers to scramble for onshore production of electric vehicles and batteries to qualify for the incentives.
Under the bill's clause, the government has committed a $369 billion investment earmarked for clean energy and climate change mitigation initiatives. This is a singular level of support pledged by the U.S. federal government to promote and transition to sustainable energy. It is one of the most significant climate bills ever passed in the country to inhibit its greenhouse gas emissions to nearly 40% by 2030 compared to 2005-levels, over the next few years.
Toyota is determined in its electrification efforts. Last year it announced investments totaling $5.1 billion to bolster its electrification drive in the country, which also covered battery production. It has also pledged around $473 million this year to support the production of hybrid-electric powertrains and engine capacity. So, it is natural that the incentives from the Inflation Reduction Act and the benefits arising from siding with the state will aid the company. Also, the company’s acceptance of California’s authority might make it eligible for fleet purchases by the state.
Shares of TM have lost 10.3% over the past year compared with its industry’s 29.2% decline.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
TM carries a Zacks Rank #4 (Sell), currently.
Better-ranked players in the auto space include Harley-Davidson (HOG - Free Report) and LCI Industries (LCII - Free Report) , each carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Harley-Davidson has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 8.5% upward in the past 30 days.
Harley-Davidson’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. HOG pulled off a trailing four-quarter earnings surprise of 49.52%, on average. The stock has risen 0.2% in the past year.
LCI Industries has an expected earnings growth rate of 68.1% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 1.3% upward in the past 30 days.
LCI Industries’ earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. LCII pulled off a trailing four-quarter earnings surprise of 26.48%, on average. The stock has declined 10.6% over the past year.