Al Root

Tesla stock was rising in early trading Thursday as investors awaited a key vote in the Senate.

Shares of the electric-vehicle maker were 0.7% higher in premarket trading at $337, while S&P 500 and Dow Jones Industrial Average futures were up 0.2% and down 0.1%, respectively.

The Senate is expected to vote on a Congressional Review Act measure Thursday designed to essentially eliminate a waiver granted by the Environmental Protection Agency that lets California regulate its air emissions.

The CRA can be used to overturn federal agency actions.

It's a controversial step. For starters, California has been regulating its air quality since the late 1960s. And Republicans have maneuvered around Senate filibuster rules. Democrats aren't happy with the strategy. "The Republican plan would backfire," said Senate Finance Committee Ranking Member Ron Wyden, D-Oregon, in a news release. "Partisan actions cut both ways." Democrats could do the same thing to federal rules favored by Republicans down the road.

However the vote turns out, it appears to be just one step in a lengthy fight over California emissions. California has fought to keep its ability to regulate air emissions in the past.

The Senate vote isn't the first salvo from the Republican-controlled Congress. Earlier in May, House lawmakers voted to nullify the " waiver of preemption" for California's " Advanced Clean Cars II" regulations, which the Environmental Protection Agency had posted in January.

Advanced Clean Cars II currently requires roughly two-thirds of all vehicles sold in California -- and several other states that have adopted California standards -- to be zero-emission by 2030. That's a tall order, with EVs accounting for about 20% of California's new car sales today. EVs are only about 7% to 8% of nationwide new car sales.

Changes could be a problem for Tesla because California regulations form the basis for much of Tesla's zero-emission vehicle credit sales, which have generated about $2.9 billion over the past 12 months.

Tesla stock, so far, has been relatively immune to the California air quality news. Coming into Thursday trading, shares were up almost 19% in May.

One explanation for the move is AI. Investors are thinking more about the company's plans to launch a robotaxi service in Austin, Texas, in June. The success of that business depends more on Tesla's AI-trained self-driving software than its electric motors and batteries.

Tesla investors might also realize there is still a long way to go to overturn the California system fully.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 22, 2025 04:31 ET (08:31 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.