California Executive Order On Combustion Engines Is A Goal, Not A Ban: Analyst

Last Wednesday, California Gov. Gavin Newsom signed an executive order to ban the sale of new gas-powered cars and pickup trucks in the state by 2035.

BofA's Take On California Order: The wording of Executive Order N-79-20 reads as a goal instead of an order, BofA Securities analyst John Murphy said in a note. 

“Don’t let the facts get in the way of a good story,” the analyst said.

The order reads: "it shall be a goal of the state that 100% of in-state sales of new passenger cars and trucks will be zero-emission by 2035."

Why It’s Important: California lead the U.S. in new car sales, representing 11% of the market.

The state also leads the California Air Resources Board, which represents another 22% of the new car market — states that follow California’s emission recommendations.

“We do not necessarily disagree with Newsom’s intention, and continue to view EVs as a material part of the automotive industry’s answer to the emissions dilemma,” Murphy said.

BofA is now estimating that 50% of new vehicle introductions over the next four years will have alternative powertrains, with General Motors GM and Volkswagen AG VWAGY leading the way.

General Motors has more than 20 new battery-powered electric vehicles planned by 2023, and Volkswagen has 50 new electric vehicle offerings in the pipeline between now and 2025, according to NBC News. 

Volkswagen Group of America CEO Scott Keogh expects the U.S. to reach 15% to 20% electric vehicle market share by 2025 and “spike up from there,” the report said. 

BofA expects "EVs to be a growing portion of vehicles sold in the U.S., but at a more tempered pace than hyper EV bulls expect,” Murphy said.   

Benzinga’s Take: As we highlighted last week, the focus on electric vehicles and emission standards from California is good news for electric vehicle companies like Tesla Inc TSLA. California is Tesla’s largest market and could become even bigger with an order or goal like this from the state.

California also put an emphasis on bringing more electric charging stations to the state, which is seen as a positive for Blink Charging Co BLNK and ChargePoint, which is merging with the SPAC Switchback Energy Acquisition SBE.