It appears that Tesla’s latest move towards vertical integration and increased mass production of its electric vehicles could not have come at a better time. California Governor Gavin Newsom yesterday unveiled that he’s targeting California’s largest source of pollution, introducing a set of new regulations that will ensure all new vehicles sold in the state will be emission-free by 2035.
In a statement issued on Wednesday, Newsom announced that California will require all new passenger vehicles sold in the state to be zero-emission by 2035, in a move to further tighten greenhouse gas regulations in the wake of climate change. The California Air Resources Board, which is the state’s air pollution regulator, will introduce new regulations that will grant automakers the next 15 years to produce electric or zero-emission vehicles to be sold in California. Other vehicles such as heavy-duty trucks will have until 2045 to meet the new stringent regulations.
However, the latest emission changes will not prohibit Californians from owning emission-producing vehicles, or from purchasing them from outside of the state. Nonetheless, given that California already has a track record of setting regulatory examples for the rest of the country, it is very likely that other states will soon follow suit. Given that California is currently home to the biggest EV manufacturer in the country, Tesla’s plans to ramp up production to an eventual 20 million cars per year will coincide proportionately with the new emission regulations.
Nonetheless, although certainly optimistic, a timeline of 15 years for a state to be emission-free in terms of passenger cars will most likely be met with obstacles. Among major American automakers, Ford has thus far made the largest headwind in terms of transitioning into the EV market by introducing a new lineup of electric vehicles. However, the remainder of the auto-manufacturing industry still remains strongly reliant on gas and diesel SUVs and pickup trucks to meet yearly sales goals. Currently, electric vehicles only make up 2% of all new car sales in the country, so California will surely have a long road ahead in order to meet its idealistic emission standards.
Information for this briefing was found via the Office of Governor Gavin Newsom. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.