Long-Awaited EPA ‘27 Update is Here; Mostly As Expected, But Some Outstanding Factors Can Still Move the Needle

Research evidence excerpt

Long-Awaited EPA ‘27 Update is Here; Mostly As Expected, But Some Outstanding Factors Can Still Move the Needle

Update

July 10, 2026 12:48 AM GMT

Morgan Stanley & Co. LLCMMachinery & Construction | North America Angel Castillo

Equity Analyst

Long-Awaited EPA '27 Update is Angel.Castillo@morganstanley.comOliver Jiang +1 212 761-1931

Research Associate

Oliver.Jiang@morganstanley.com +1 212 761-6458

Here; Mostly As Expected, But Stefan Diaz, CFA

Stefan.Diaz@morganstanley.com +1 212 761-1834

Some Outstanding Factors Can Esther O Osinaiya

Esther.Osinaiya@morganstanley.com +1 212 761-3176

Still Move the Needle

Machinery & Construction

North America

What happened? Earlier today (7/6/26), the EPA released its much-awaited notice Industry View Attractive

of proposed rulemaking (NPRM) to amend the emission compliance provisions for

MY27 and later heavy-duty highway engines. The proposed amendments are largely

in line with expectations (see HERE and HERE): i) the 35 mg/hp-hr NOx standard and

Jan 1, 2027 start date remain unchanged; ii) the warranty period is substantially

shortened, from 10 years to 5 years; and iii) the useful life requirements are delayed

to start in MY30 instead of next year. Importantly, EPA has quantified the

nonconformance penalties (NCPs), which will be available to engine OEMs whose

engines do not meet the 2027 emissions regulations beginning in 2027. Specifically

and as shown in Exhibit 2 and Exhibit 3 , at a 45 mg/hp-hr compliance level (i.e

10mg above the 35mg/hp-hr threshold) the penalty will be $851 to $904 per engine,

and at 100 mg it is $3.8k to $5.9k, depending on the engine class.

What does this mean for truck OEM+s? At first pass, we think the proposed rules

maintain the status quo. In particular, the NCP guidelines appear to strike a good