The Zhitong Finance App learned that a research report issued by Huatai Securities said that on March 20, local time, the United States released emission standards for various pollutants for light/medium vehicles in 2027 and beyond. Compared with the final version and last year's draft, the bank believes that the rate of decline in emissions has slowed down in 27-30, and that car companies may have a longer window to transform. Considering that the 2032 carbon emission target remains halved, the standard will accelerate the electrification transformation of US automobiles over the long term, and at the same time further open up space for China's lithium battery industry to go overseas due to lagging domestic industrial chain construction in the US.
The main views of Huatai Securities are as follows:
US Releases New Emissions Standards to Accelerate Vehicle Electrification Transition
On March 20, local time, the United States issued emission standards for various pollutants for light/medium vehicles in 2027 and beyond, requiring light passenger cars to reduce emissions of greenhouse gases such as carbon dioxide and air pollutants by half by 2032. The regulations were formulated by the US Environmental Protection Agency (EPA) and took nearly three years. The draft was drafted in April '23, the final draft was submitted to the White House in January '24, and passed for review as a new climate regulation in March '24.
Compared with the final version and last year's draft, the bank believes that the rate of decline in emissions has slowed down in 27-30, and that car companies may have a longer window to transform. Considering that the carbon emission target for 2032 remains halved, the standard will accelerate the electrification transformation of US automobiles over the long term, while at the same time further opening up the space for China's lithium battery industry to go overseas due to lagging domestic industrial chain construction in the US.
The new standard clarifies the emission reduction process and predicts the penetration rate of electrification
The new standard will use 2026 as the base year, requiring a 50% reduction in greenhouse gas emissions by 2032, a reduction of 7.2 billion tons of greenhouse gas emissions by 2055, and an annual reduction target for 27-32. 27 young cars will need to emit 170 grams of carbon dioxide per mile, and will gradually decrease to 85 g/mile by '32. Car companies can flexibly adjust the technical route mix of their products to meet standards.
The EPA has published a regulatory analysis that looks forward to the electrification penetration rate (not mandatory, but rather a forecast of how car companies will change their fleets to meet regulations). It predicts that the light vehicle BEV/PHEV penetration rate will be 26%/6% by 2027, and will gradually increase to 56%/13% by 2032.
Compared to the previous draft, the final version has slowed the pace of emission reduction
Compared to last year's proposal, the final version slowed the decline in emission reduction targets for 27-30 years.
The original proposal required that 2027/2030 emission standards be reduced by 19%/45% compared to the base year (the final version of the new standard required 9%/36%), and predicted that the BEV penetration rate would reach 36%/60% in 2027/2030, and the old proposal did not mention PHEV as an option.
The proposal was announced last year, causing controversy: key voters' auto unions strongly opposed it; car companies feared that infrastructure construction would not keep up with the pace of electric vehicle growth; the Auto Innovation Alliance said it would end fuel vehicle production too soon or cause insufficient funding for electrification and urged revisions to the proposal. The Biden administration finally relaxed standards, providing car companies with a more relaxed transition window.
The new standard has been recognized by the market, and the long-term electrification strategy of the United States is clear
Consider that the final version is a version where policy makers and trade unions, industry trade organizations, the Automobile Innovation Alliance, and car company representatives have reached a consensus. Many parties will cooperate to achieve the goals.
According to the EPA's announcement, the EV penetration rate in new US car sales in 2023 is only 8%, and there is still a big difference from the 2032 target of 56%. The bank believes that based on long-term development goals, there is still a lot of room for electrification improvement. Although it directly stimulates or is limited in sales in the short term, it will boost market confidence. Furthermore, considering that the lithium battery industry chain in the US is still immature, the increase in electric models may bring new opportunities for China's lithium battery industry to go overseas.
Risk warning: the risk that trade frictions between China and the US will intensify and industry competition will intensify; the risk of policy changes due to changes in the US political environment.