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EPA's New Proposal to Fast Track US EV Sales: 5 Stocks in Focus
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In a bid to tackle the climate crisis and reduce pollution levels, the U.S. Environmental Protection Agency (EPA) has proposed the strictest-ever vehicle emissions standards. The EPA’s ambitious pollution technology standards pave the way for a swifter transition to clean mobility and are set to boost electric vehicle (EV) sales in the United States. To capitalize on the strong EV momentum in the coming years, investors should consider having stocks like General Motors (GM - Free Report) , Tesla (TSLA - Free Report) , BorgWarner Inc. (BWA - Free Report) , Albemarle Corp. (ALB - Free Report) and Enersys (ENS - Free Report) on their watchlist.
More on EPA’s New Proposal
EPA’s new proposal seeks to prevent 10 billion tons of CO2 emissions through 2055, which is twice the amount emitted by vehicles in the United States in 2022. Additionally, it is claimed that the regulations would result in significant cost savings over the lifespan of the vehicles. Moreover, the EPA predicts that the new rules would reduce America's dependence on imported oil by 20 billion barrels. The EPA's assessment indicates that the benefits of the proposed standards would outweigh the costs by a minimum of $1 trillion.
The new rules with stringent pollution standards will be applicable to vehicles built between 2027 and 2032. As a result, manufacturers will be pushed to promote and sell more electric vehicles to comply with the new guidelines.
EPA estimates that two-thirds of the new light-duty vehicle sales in 2032 would have to be electric in order for carmakers to comply. Likewise, 46% of new medium-duty vehicle sales in 2032 would need to be electric.
The new proposed standards require carbon emissions from light-duty vehicles to be limited to approximately 80 grams per mile by 2032. It is estimated that the model year 2032 light-duty standards, if implemented, would lead to a 56% decrease from the 2026 targets. Similarly, the proposed model year 2032 medium-duty vehicle standards would result in a 44% reduction from 2026 targets.
Per EPA, the total projected net benefits of the light- and medium-duty proposal range from $850 billion to $1.6 trillion between 2027 and 2055. It is expected to reduce 7.3 billion tons of CO2 emissions through 2055. For heavy-duty trucks, the proposal is projected to prevent 1.8 billion tons of CO2 emissions through 2055.The estimated net gains of the heavy-duty proposal would range between $180 billion and $320 billion.
Quoting EPA Administrator Michael S. Regan, “By proposing the most ambitious pollution standards ever for cars and trucks, we are delivering on the Biden-Harris Administration’s promise to protect people and the planet, securing critical reductions in dangerous air and climate pollution and ensuring significant economic benefits like lower fuel and maintenance costs for families. These ambitious standards are readily achievable thanks to President Biden’s Investing in America agenda, which is already driving historic progress to build more American-made electric cars and secure America’s global competitiveness.”
The CEO of automaker trade group Alliance for Automotive Innovation views EPA’s proposal as “aggressive by nature.” He said that the electrification goals are too high and exceed Biden’s 50% EV sales target for 2030, which was announced less than two years ago.
The EV Race to Only Get Fiercer
While the overall U.S. vehicle sales were down year over year in 2022, EV sales managed to maintain momentum. More than 807,000 EVs were sold last year in the United States, accounting for 5.8% of total vehicle sales, up from 3.2% in 2021. Per Statista, EV sales in the United States are expected to reach 2.13 million units by 2027. Revenues are expected to witness a CAGR of around 23% between 2023-2027, resulting in a projected market volume of $139.1 billion by 2027.
Legacy automakers are revving up their up e-mobility game and are setting deadlines to phase out ICE models. Pure-play EV makers are also focused on expanding their vehicle lineup. The pursuit of EV dominance is only expected to intensify in the coming years as major automakers, startups and pure EV companies all work toward the development of eco-friendly vehicles.
It goes without saying that investors get a massive opportunity to reap tremendous gains from the industry’s growth trajectory.
Tap the Supercharged Space With These Stocks
General Motors: The massive EV push by the U.S. legacy automaker is commendable. The automaker plans to roll out 30 fresh EV models by 2025-end. This year, it will have nine EV models in the North America market. Solid demand for GMC Hummer EV, Chevrolet Bolt EV and EUV, Cadillac crossover EV, Equinox EV, Silverdo EV, Sierra EV, Blazer EV and BrightDrop Zevo 600 are expected to buoy top-line growth. The BrightDrop venture, designed to offer an integrated ecosystem of electric first-to-last-mile products, is set to boost prospects. The firm’s Ultium Drive system is aiding the transition to an all-electric portfolio down the road. GM’s battery plants in Ohio, Tennessee and Lansing are likely to scale up its e-mobility prowess
GM currently carries a Zacks Rank #2 (Buy) and has a VGM Score of A. It has an expected EPS growth rate of 10%. The company surpassed earnings estimates in three of the trailing four quarters, the average surprise being 15.3%.
Tesla: The EV king is set to benefit from the soaring popularity of its Models 3 and Y. Deliveries of Model 3/Y witnessed a CAGR of more than 100% over the last 3 years. Despite supply chain disruptions and economic challenges, total deliveries grew 40.3% year over year to more than 1.3 million units in 2022. We expect deliveries to grow roughly 33% year over year this year. Production ramp-up at gigafactory 4 (in Berlin) and 5 (in Austin) and the introduction of new models, including Semi and Cybertruck, are set to support long-term deliveries growth.
TSLA currently carries a Zacks Rank #3 (Hold) and has a VGM Score of B. It has an expected EPS growth rate of 24.5%. The company surpassed earnings estimates in the trailing four quarters, the average surprise being 23.5%.
BorgWarner: Investors can capitalize on the rosy EV market prospects by investing in firms that provide automakers with power solutions. One such stock is BorgWarner. BWA’s Charging Forward project is expected to accelerate its electrification strategy. The company’s 2023 electrification revenues are expected to increase to more than $1.5-$1.8 billion, up from $870 million from 2022. The firm’s booked eMotor volumes are expected to rise from 0.3 million units in 2021 to 2 million units by 2025, representing a CAGR of around 60%. BorgWarner has booked programs that will support approximately 2 million eMotors, 3.1 million inverters and close to 4 million e-heaters by 2025. The company is on track to achieve more than $4.3 billion of EV revenues by 2025, thanks to new business awards and strategic actions.
BWA currently carries a Zacks Rank #3 and has a VGM Score of A. It has an expected EPS growth rate of 13.4%. The company surpassed earnings estimates in the trailing four quarters, the average surprise being 24%.
Albemarle: You can also consider going one step down the supply chain and investing in lithium stocks as the metal is a key component of EV batteries. Albemarle is one of the leading producers of lithium, with battery-grade lithium-producing plants in Australia, China, Chile and the United States. The company’s lithium unit accounts for the highest percentage of overall revenues and profits. ALB, thus, remains laser-focused on the expansion of its lithium footprint. The Talison joint venture (49%) in Australia, La Negra projects, JV with Mineral Resources and acquisition of the Qinzhou plant in China should fuel Albemarle’s lithium business.
ALB currently carries a Zacks Rank #3 and has a VGM Score of B. It has an expected EPS growth rate of 16%. The company surpassed earnings estimates in the trailing four quarters, the average surprise being 15.7%.
Enersys: With batteries serving as the secret sauce for green vehicles, one can gain exposure to the EV industry by investing in battery stocks. Enersys is one of the leading manufacturers of batteries for a wide range of applications, including automotive, aerospace, and defense. Battery brands of the firm include Odyssey, NexSys and PowerSafe among others. A solid product portfolio, continuous innovation and new product offerings are key strengths of EnerSys. The NorthStar acquisition has further boosted EnerSys’ prospects. Enersys has seen steady revenue growth over the years, with revenues increasing 12.7% in fiscal 2022.
ENS currently carries a Zacks Rank #3 and has a VGM Score of A. It has an expected EPS growth rate of 14%. The company surpassed earnings estimates in three of the trailing four quarters and matched once, the average surprise being 2.2%.
Image: Bigstock
EPA's New Proposal to Fast Track US EV Sales: 5 Stocks in Focus
In a bid to tackle the climate crisis and reduce pollution levels, the U.S. Environmental Protection Agency (EPA) has proposed the strictest-ever vehicle emissions standards. The EPA’s ambitious pollution technology standards pave the way for a swifter transition to clean mobility and are set to boost electric vehicle (EV) sales in the United States. To capitalize on the strong EV momentum in the coming years, investors should consider having stocks like General Motors (GM - Free Report) , Tesla (TSLA - Free Report) , BorgWarner Inc. (BWA - Free Report) , Albemarle Corp. (ALB - Free Report) and Enersys (ENS - Free Report) on their watchlist.
More on EPA’s New Proposal
EPA’s new proposal seeks to prevent 10 billion tons of CO2 emissions through 2055, which is twice the amount emitted by vehicles in the United States in 2022. Additionally, it is claimed that the regulations would result in significant cost savings over the lifespan of the vehicles. Moreover, the EPA predicts that the new rules would reduce America's dependence on imported oil by 20 billion barrels. The EPA's assessment indicates that the benefits of the proposed standards would outweigh the costs by a minimum of $1 trillion.
The new rules with stringent pollution standards will be applicable to vehicles built between 2027 and 2032. As a result, manufacturers will be pushed to promote and sell more electric vehicles to comply with the new guidelines.
EPA estimates that two-thirds of the new light-duty vehicle sales in 2032 would have to be electric in order for carmakers to comply. Likewise, 46% of new medium-duty vehicle sales in 2032 would need to be electric.
The new proposed standards require carbon emissions from light-duty vehicles to be limited to approximately 80 grams per mile by 2032. It is estimated that the model year 2032 light-duty standards, if implemented, would lead to a 56% decrease from the 2026 targets. Similarly, the proposed model year 2032 medium-duty vehicle standards would result in a 44% reduction from 2026 targets.
Per EPA, the total projected net benefits of the light- and medium-duty proposal range from $850 billion to $1.6 trillion between 2027 and 2055. It is expected to reduce 7.3 billion tons of CO2 emissions through 2055. For heavy-duty trucks, the proposal is projected to prevent 1.8 billion tons of CO2 emissions through 2055.The estimated net gains of the heavy-duty proposal would range between $180 billion and $320 billion.
Quoting EPA Administrator Michael S. Regan, “By proposing the most ambitious pollution standards ever for cars and trucks, we are delivering on the Biden-Harris Administration’s promise to protect people and the planet, securing critical reductions in dangerous air and climate pollution and ensuring significant economic benefits like lower fuel and maintenance costs for families. These ambitious standards are readily achievable thanks to President Biden’s Investing in America agenda, which is already driving historic progress to build more American-made electric cars and secure America’s global competitiveness.”
The CEO of automaker trade group Alliance for Automotive Innovation views EPA’s proposal as “aggressive by nature.” He said that the electrification goals are too high and exceed Biden’s 50% EV sales target for 2030, which was announced less than two years ago.
The EV Race to Only Get Fiercer
While the overall U.S. vehicle sales were down year over year in 2022, EV sales managed to maintain momentum. More than 807,000 EVs were sold last year in the United States, accounting for 5.8% of total vehicle sales, up from 3.2% in 2021. Per Statista, EV sales in the United States are expected to reach 2.13 million units by 2027. Revenues are expected to witness a CAGR of around 23% between 2023-2027, resulting in a projected market volume of $139.1 billion by 2027.
Legacy automakers are revving up their up e-mobility game and are setting deadlines to phase out ICE models. Pure-play EV makers are also focused on expanding their vehicle lineup. The pursuit of EV dominance is only expected to intensify in the coming years as major automakers, startups and pure EV companies all work toward the development of eco-friendly vehicles.
It goes without saying that investors get a massive opportunity to reap tremendous gains from the industry’s growth trajectory.
Tap the Supercharged Space With These Stocks
General Motors: The massive EV push by the U.S. legacy automaker is commendable. The automaker plans to roll out 30 fresh EV models by 2025-end. This year, it will have nine EV models in the North America market. Solid demand for GMC Hummer EV, Chevrolet Bolt EV and EUV, Cadillac crossover EV, Equinox EV, Silverdo EV, Sierra EV, Blazer EV and BrightDrop Zevo 600 are expected to buoy top-line growth. The BrightDrop venture, designed to offer an integrated ecosystem of electric first-to-last-mile products, is set to boost prospects. The firm’s Ultium Drive system is aiding the transition to an all-electric portfolio down the road. GM’s battery plants in Ohio, Tennessee and Lansing are likely to scale up its e-mobility prowess
GM currently carries a Zacks Rank #2 (Buy) and has a VGM Score of A. It has an expected EPS growth rate of 10%. The company surpassed earnings estimates in three of the trailing four quarters, the average surprise being 15.3%.
Tesla: The EV king is set to benefit from the soaring popularity of its Models 3 and Y. Deliveries of Model 3/Y witnessed a CAGR of more than 100% over the last 3 years. Despite supply chain disruptions and economic challenges, total deliveries grew 40.3% year over year to more than 1.3 million units in 2022. We expect deliveries to grow roughly 33% year over year this year. Production ramp-up at gigafactory 4 (in Berlin) and 5 (in Austin) and the introduction of new models, including Semi and Cybertruck, are set to support long-term deliveries growth.
TSLA currently carries a Zacks Rank #3 (Hold) and has a VGM Score of B. It has an expected EPS growth rate of 24.5%. The company surpassed earnings estimates in the trailing four quarters, the average surprise being 23.5%.
BorgWarner: Investors can capitalize on the rosy EV market prospects by investing in firms that provide automakers with power solutions. One such stock is BorgWarner. BWA’s Charging Forward project is expected to accelerate its electrification strategy. The company’s 2023 electrification revenues are expected to increase to more than $1.5-$1.8 billion, up from $870 million from 2022. The firm’s booked eMotor volumes are expected to rise from 0.3 million units in 2021 to 2 million units by 2025, representing a CAGR of around 60%. BorgWarner has booked programs that will support approximately 2 million eMotors, 3.1 million inverters and close to 4 million e-heaters by 2025. The company is on track to achieve more than $4.3 billion of EV revenues by 2025, thanks to new business awards and strategic actions.
BWA currently carries a Zacks Rank #3 and has a VGM Score of A. It has an expected EPS growth rate of 13.4%. The company surpassed earnings estimates in the trailing four quarters, the average surprise being 24%.
Albemarle: You can also consider going one step down the supply chain and investing in lithium stocks as the metal is a key component of EV batteries. Albemarle is one of the leading producers of lithium, with battery-grade lithium-producing plants in Australia, China, Chile and the United States. The company’s lithium unit accounts for the highest percentage of overall revenues and profits. ALB, thus, remains laser-focused on the expansion of its lithium footprint. The Talison joint venture (49%) in Australia, La Negra projects, JV with Mineral Resources and acquisition of the Qinzhou plant in China should fuel Albemarle’s lithium business.
ALB currently carries a Zacks Rank #3 and has a VGM Score of B. It has an expected EPS growth rate of 16%. The company surpassed earnings estimates in the trailing four quarters, the average surprise being 15.7%.
Enersys: With batteries serving as the secret sauce for green vehicles, one can gain exposure to the EV industry by investing in battery stocks. Enersys is one of the leading manufacturers of batteries for a wide range of applications, including automotive, aerospace, and defense. Battery brands of the firm include Odyssey, NexSys and PowerSafe among others. A solid product portfolio, continuous innovation and new product offerings are key strengths of EnerSys. The NorthStar acquisition has further boosted EnerSys’ prospects. Enersys has seen steady revenue growth over the years, with revenues increasing 12.7% in fiscal 2022.
ENS currently carries a Zacks Rank #3 and has a VGM Score of A. It has an expected EPS growth rate of 14%. The company surpassed earnings estimates in three of the trailing four quarters and matched once, the average surprise being 2.2%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.