General Motors and Ford scored a major win Tuesday as the U.S. softened fuel economy rules envisioning a rapid EV transition. GM stock broke out Wednesday and Ford stock jumped near a buy point.
Revised EV Mileage Rule Brings Relief
The Department of Energy significantly eased proposed rules that would have forced automakers to reduce production of gas-guzzling vehicles or face billions of dollars in fines, Reuters first reported.
Its final rules effectively allow GM, Ford and others to build more traditional vehicles with internal combustion engines (ICE) through 2030 and still reach fuel economy requirements.
The original proposal would have lowered "petroleum-equivalent fuel economy" ratings for electric vehicles by 72% in 2027. The final rules will instead gradually cut the equivalency ratings through 2030 by 65%, giving automakers more time to adjust.
Automakers pushed back against the initial proposals, which could have led to $10.5 billion in fines through 2032 for not meeting fuel-economy requirements.
GM would have faced $6.5 billion in fines; Dodge and Ram truck parent Stellantis $3 billion; and Ford $1 billion, Reuters said.
Automakers planned to phase out ICE vehicles for electric cars. But they say the pace of EV adoption has slowed.
GM Stock, Ford Stock
Shares of General Motors rose 3.2% to 42.85 on Wednesday. Shares added 0.5% in early trade on the stock market today.
On Wednesday, GM stock topped a 41.80 buy point from a huge consolidation, but volume was light. The U.S. auto giant is up 7% since last Thursday amid reports that the EPA would ease EV mileage rules. The relative strength line is at a seven-month high, signaling recent GM stock outperformance vs. the S&P 500 index.
Ford stock popped nearly 5% to 12.90 Wednesday, rebounding from the 200-day line. Shares are working on a 31.07 buy point from a flat base forged following a strong bounce from a 52-week low in November. The stock was unchanged in premarket action on Thursday.
Stellantis stock jumped nearly 2% on Wednesday to a fresh record high. Shares rose early Thursday.
The news also moved shares of Toyota and Honda. Toyota ended Wednesday up more than 5% for the week, and with a year-to-date gain of more than 34%.
Honda stock scored a breakout above a 36.61 handle buy point. Shares ended Wednesday up 2.8% on the week, and almost 20% higher since Dec. 31.
ICE To EV Transition
The revised EV mileage rules came after intense discussions between the Joe Biden administration and automakers. The latter said they could not meet original proposals calling for a much more aggressive shift from ICE to EV.
Separately on Wednesday, the Environmental Protection Agency unveiled its final vehicle emissions standards giving automakers more time to continue selling gas-powered models while they scale up supply chains for electric vehicles.
The EPA forecast last year that EVs would be 60% of new car sales by 2030 and 67% by 2032, up from 8% in 2023.
The final rules project EVs making up 30%-56% of new car sales from 2030-2032, Reuters said.
Shift From EV To Hybrid
In late January, GM said it will bring back hybrid vehicles in response to an EV slowdown in the U.S. Ford also said it will shift investments to hybrid cars.
In the past year, Japan's Toyota and Honda have easily outpaced gains for GM stock and Ford, due in part to their surging hybrid sales. Toyota and Honda stock both edged up a fraction higher Wednesday.
The new federal fuel economy rules apply to all automakers in the U.S. But they especially impact the Detroit Big 3, which derive more of their sales from large combustion-engine SUVs and trucks.
