Allison Transmission Holdings, Inc. (ALSN): PESTLE Analysis [Nov-2025 Updated]

You're holding Allison Transmission Holdings, Inc. (ALSN) and seeing mixed signals: the core North American truck market is defintely slowing, but the stock is holding up. Why? Because management is executing a pivot. Despite revising 2025 net sales down to between $2.975 billion and $3.025 billion, they're maintaining a projected Adjusted EBITDA of up to $1.125 billion, thanks to defense contracts and disciplined pricing. The real story, however, is how a massive $2.7 billion acquisition and the looming threat of electrification (Technological) clash with new EPA rules (Legal). Let's break down the macro forces shaping ALSN's next five years.

Political Factors: Defense and Infrastructure as Offsets

• Trade tensions and tariffs create global demand uncertainty, forcing Allison Transmission to diversify revenue streams.
• The Defense end market is a key growth offset, with Q3 2025 sales up 47% year-over-year, providing a stable, high-margin anchor.
• International program wins, such as Turkey's Korkut defense system, are crucial for diversifying revenue away from a soft US market.
• US government infrastructure spending, driven by legislative acts, directly bolsters demand for vocational trucks, a core Allison Transmission segment.

Economic Factors: Navigating the Freight Recession

The biggest near-term headwind is the economic slowdown. North American new truck sales forecasts were cut by 7% for 2025 amid a freight recession, which directly impacts Allison Transmission's largest segment. Here's the quick math: US real GDP growth forecasts for 2025 were revised downward to 1.3%, slowing commercial investment across the board. Still, they are maintaining a strong Adjusted EBITDA margin midpoint, projected to be between $1.09 billion and $1.125 billion, which tells you their cost discipline is holding up.

• The acquisition of Dana Incorporated's Off-Highway business for approximately $2.7 billion expands market reach into construction and mining, buffering the cyclical truck market.
• Price increases on certain products are helping to partially offset lower sales volumes, showing pricing power.
• Liquidity remains strong, with over $900 million of cash on hand at Q3 2025 end, providing a cushion for the Dana integration.

Sociological Factors: The Driver and Durability Premium

The human element drives demand for Allison Transmission's fully automatic transmissions. The driver shortage and fatigue concerns increase demand for automatics because they are easier to operate and reduce stress. Plus, customers are showing a growing preference for reliable, durable transmissions in severe-duty applications like refuse and construction. This focus on fleet Total Cost of Ownership (TCO) drives demand for fuel-efficient models (xFE), which save money over the life of the vehicle. Global push for sustainable logistics and supply chain efficiency favors advanced propulsion solutions.

Technological Factors: The Electrification Pivot

This is the biggest long-term risk and opportunity. The rapid shift toward electrification is forcing Allison Transmission to pivot, including their eGen Power fully electric axles and hybrid systems. Competitor innovation, like ZF's TraXon 2 Hybrid transmission, pressures Allison Transmission's core market, but the company is spending to keep up. Growing adoption of telematics and AI-driven predictive maintenance requires transmission integration, turning the transmission into a smart component. The company's focus remains on full automatics, even as competitors continue investment in Automated Manual Transmissions (AMT).

Legal Factors: Regulatory Hurdles and License Expiration

The regulatory environment is complex. All regulatory approvals were received for the $2.7 billion Dana Off-Highway acquisition as of November 2025, clearing the way for integration. The US EPA2027 emissions standards create a complex pre-buy and technology transition environment that will affect sales cycles. Critically, the long-standing license agreement with General Motors for HD trucks is ending on December 31, 2025, a transition that requires careful management. Separately, UK's 'Simpler Recycling' legislation drives new vehicle procurement in Europe, opening a small, specific opportunity.

Environmental Factors: Fuel Efficiency as a Sales Driver

Stricter global Greenhouse Gas (GHG) and fuel efficiency standards (e.g., EPA) push demand for low-emission solutions, which is a tailwind for Allison Transmission's xFE (extra Fuel Economy) transmissions. These xFE transmissions deliver reported fuel savings of 4.8% in vocational fleets, a powerful sales argument given high fuel costs. The company shows commitment to sustainability, including ISO 14001 certification at five global manufacturing sites. They are also developing products compatible with alternative combustible fuels like natural gas and propane to reduce emissions.

Next Step: Finance: Model the post-Dana integration cash flow and the impact of the GM license expiration by end of Q4 2025.

Allison Transmission Holdings, Inc. (ALSN) - PESTLE Analysis: Political factors

Trade tensions and tariffs create global demand uncertainty.

You're seeing the impact of geopolitical friction directly in your core business, so it's critical to map political risk to sales performance right now. Global macroeconomic factors, including the lingering effects of trade protectionism and tariffs (taxes on imported goods), have created significant demand uncertainty in the commercial vehicle market. This isn't just an abstract concern; it hit your largest segment hard.

In the third quarter of 2025 alone, Allison Transmission Holdings, Inc.'s North America On-Highway net sales dropped by a substantial $130 million year-over-year. Management has specifically pointed to this macro and tariff uncertainty as a key factor causing end users to defer major vehicle purchases, especially for Class 8 vocational and medium-duty trucks. Honestly, when the political winds shift, capital expenditure freezes up fast.

Defense end market is a key growth offset, with Q3 2025 sales up 47% year-over-year.

The good news is that the defense end market acts as a powerful counter-cyclical hedge against commercial market softness. While trade tensions hurt the on-highway segment, increased global and domestic military spending has provided a significant political tailwind. This is a classic diversification strategy paying off.

For the third quarter of 2025, net sales in the Defense end market reached $78 million, marking a robust increase of over 47% compared to the same period last year. This surge was primarily driven by heightened demand for tracked vehicle applications and the continued execution of your growth initiatives in this sector. That's a strong, clean one-liner: Defense sales are a crucial stabilizer in a choppy market.

International program wins, like Turkey's defense systems, diversify revenue.

Political relationships and defense budgets abroad are actively diversifying Allison Transmission Holdings, Inc.'s revenue base away from reliance on North American commercial cycles. A prime example is the company's success in securing major international defense contracts, often tied to improving bilateral political ties.

A key win in 2025 was the Phase Two agreement with HST Otomotiv, Allison Transmission's licensed manufacturer in Turkey, to supply the X1100-5A4 cross-drive transmission for the Turkish Armed Forces' Next-Generation T-155 Firtina Self-Propelled Howitzer. This contract is valued at approximately $100 million and is expected to drive $100 million of incremental annual revenue in the Defense end market. Also, in October 2025, the company secured a domestic $97 million contract to support the U.S. Army's Abrams Main Battle Tank program, further solidifying its political position as a critical defense supplier.

Here's a quick look at how these defense wins stack up:

US government infrastructure spending bolsters demand for vocational trucks.

The political decision to fund major infrastructure projects-like the Infrastructure Investment and Jobs Act (IIJA)-is a foundational demand driver for Allison Transmission Holdings, Inc.'s vocational market. Your CEO, David Graziosi, noted in Q1 2025 that the expected surge in infrastructure spending was bearing out, which is a defintely positive political signal.

The company is structurally well-positioned for this spending, as an estimated 30% to 40% of the North America On-Highway business is with municipal customers. This municipal portion is generally insulated from broader economic volatility, as local governments continue to purchase necessary equipment like dump trucks and snowplows even amidst economic uncertainty. Still, what this estimate hides is the near-term economic risk: while the funding is there, the North America On-Highway segment still saw a demand softness in Q3 2025, which included vocational trucks, indicating that high interest rates and broader economic slowdowns can still temporarily delay local government and construction fleet purchases.

Allison Transmission Holdings, Inc. (ALSN) - PESTLE Analysis: Economic factors

North American New Truck Demand Softens Amid Freight Recession

You are defintely seeing the impact of the prolonged freight recession across the trucking sector, and Allison Transmission Holdings, Inc. is not immune. The weakness in the North American on-highway market-Allison's largest segment-is the clearest headwind. In the third quarter of 2025 alone, net sales in this segment saw a significant decline of $130 million, primarily driven by lower demand for both Class 8 vocational and medium-duty trucks. This is a direct result of fleets pulling back on capital expenditures as freight volumes remain soft and capacity still exceeds demand.

The company's full-year 2025 outlook reflects this reality, with management revising their net sales guidance downward to a range of $2,975 million to $3,025 million. This is a material change from the original guidance, showing how quickly a freight recession can translate into lower build rates at truck manufacturers. The slowdown is particularly notable in the medium-duty market, which has been soft throughout 2025, and is now extending to the Class 8 vocational side.

US Real GDP Growth Slows, Impacting Commercial Investment

The broader macroeconomic picture in the US is one of slowing growth, which directly affects the commercial investment decisions that drive Allison's core business. Mid-year 2025 projections indicated that US real Gross Domestic Product (GDP) growth was expected to decline to 1.3%, a notable drop from the 2024 rate of 2.8%. While the annual-average forecast for 2025 is slightly higher at 1.7%, the quarterly deceleration is what matters for near-term commercial activity.

This environment of 'recalibration' means financing remains expensive for fleets and construction companies, keeping a lid on new equipment purchases. The slowdown in freight-intensive categories like construction and manufacturing continues to lag broader economic activity, which explains the reduced demand for the vocational and off-highway vehicles that use Allison's products.

Strategic Growth via Dana Off-Highway Acquisition

To be fair, Allison is not just reacting to the market; they are making a massive strategic move. The definitive agreement to acquire Dana Incorporated's Off-Highway business for approximately $2.7 billion is a game-changer for market reach. This transaction, expected to close late in the fourth quarter of 2025, immediately expands Allison's total addressable market by adding axles, propulsion solutions, and drivetrain components for construction, mining, and agriculture.

The quick math here is compelling: the acquisition is expected to be immediately accretive to diluted earnings per share and is anticipated to generate annual run-rate synergies of approximately $120 million. This is a clear action to diversify revenue away from the cyclical North American on-highway market and into more resilient global off-highway segments.

• Acquisition Price: $2.7 billion
• Expected Synergies: $120 million annually
• Target Close: Late Q4 2025

Price Increases Partially Offset Volume Declines

In the face of lower sales volumes, Allison has been disciplined on pricing, which is a key factor in protecting margins. Price increases on certain products have been a consistent theme throughout 2025. In the second quarter of 2025, these price increases were the principal driver for a higher gross profit of $402 million, partially offsetting the impact of lower volumes.

This strategy is crucial for maintaining profitability during a downturn. For example, the price hikes, along with increased demand for tracked vehicle applications, contributed to a strong performance in the Defense end market, where net sales increased by 47% year-over-year in Q3 2025 to $78 million.

Strong Liquidity and Financial Flexibility Maintained

Despite the challenging operating environment and the significant acquisition cost, Allison's liquidity remains a core strength. The company ended the third quarter of 2025 with a cash and cash equivalents balance of $902 million. This is a sequential quarterly increase of $124 million, showing strong cash generation even in a low-demand cycle.

Total liquidity stood at $1.65 billion, which includes the cash on hand plus $745 million in available revolving credit facility commitments. This financial strength is what allows them to manage the acquisition of Dana Incorporated's Off-Highway business, which will be financed using a combination of cash and new debt. The net leverage ratio of 1.33x at Q3 2025 end is manageable and provides substantial flexibility for continued investment and navigating market uncertainty.

The bottom line: Allison is generating strong cash flow even as the truck market slows.

Allison Transmission Holdings, Inc. (ALSN) - PESTLE Analysis: Social factors

You're looking at Allison Transmission Holdings, Inc. (ALSN) and need to understand the social currents that are shaping its core market. The direct takeaway is this: the deep-seated commercial driver shortage and the industry's push for lower operating costs are creating a structural tailwind for Allison's fully automatic transmissions, especially in vocational segments where they already dominate.

Driver shortage and fatigue concerns increase demand for fully automatic transmissions

The persistent shortage of commercial drivers in the U.S. is not just an economic issue; it's a major social hurdle driving technology adoption. The American Trucking Associations (ATA) estimates the industry needs to hire 1.2 million new drivers over the next decade just to keep pace. As of late 2024, the driver deficit was around 60,000, and projections indicate this could rise to over 80,000 by the end of 2025.

This massive gap forces fleets to hire less-experienced drivers. A fully automatic transmission simplifies the driving task, reducing the barrier to entry and mitigating the risk of driver error and fatigue. High turnover, which is often above 90% at large carriers, is a retention problem, and easier-to-drive equipment helps keep new hires in the seat longer. Allison's product directly addresses this lifestyle friction, making the job defintely less taxing.

Growing customer preference for reliable, durable transmissions in severe-duty applications (refuse, construction)

In severe-duty cycles-like refuse, construction, and fire/emergency-reliability is king. The cost of downtime in these sectors quickly dwarfs the initial equipment price. Allison Transmission's long-standing reputation for durability gives it a near-monopoly in these vocational markets, which are seeing robust demand in 2025.

Here's the quick math: if a refuse truck is down for a day, the cost is far more than just the repair bill; it's the missed collection routes and the hit to public service. This preference for proven durability translates directly into Allison's market share dominance in North America On-Highway vocational segments, as seen in the 2024 data:

Increased focus on fleet Total Cost of Ownership (TCO) drives demand for fuel-efficient models (xFE)

Fleet operators are hyper-focused on Total Cost of Ownership (TCO), especially with fluctuating fuel prices. This is why Allison's Extra Fuel Economy (xFE) models are a strategic lever. The xFE technology is designed for start-stop, low-average-speed duty cycles, which are common in city delivery and refuse applications.

The technology works by enabling lock-up at lower speeds and using a deeper final overdrive, which keeps the engine running at lower revolutions per minute (rpm). This shift in operating profile delivers measurable fuel savings:

• The 1000 and 2000 Series xFE transmissions have demonstrated fuel economy improvements up to 7 percent compared to baseline models.
• The 3000 and 3200 Series xFE models can reduce fuel consumption by up to 3.7 percent compared to the standard series.
• A trial with refuse collection vehicles showed an average fuel saving of 4.8 percent.

For a fleet, a few percentage points of fuel savings across hundreds of vehicles quickly becomes a massive competitive advantage. That's a huge TCO win.

Global push for sustainable logistics and supply chain efficiency favors advanced propulsion solutions

The global push for environmental, social, and governance (ESG) compliance, particularly in logistics-which contributes about 30% of global carbon emissions-is a powerful social factor. The demand for green logistics is projected to reach approximately $50 billion in 2025.

Allison Transmission is positioned to capitalize on this trend in two ways. First, its xFE transmissions offer a near-term, affordable solution to meet emissions targets, specifically helping fleets achieve a 15 percent CO2 emission reduction by 2025 in the EU context. Second, the company is actively expanding its portfolio into electrification, recognizing that advanced propulsion solutions-whether fuel-efficient diesel or electric-are the future. For example, the Neutral at Stop fuel saving technology is now standard on many Kenworth and Peterbilt models with the Allison 4700 Rugged Duty Series™ transmissions, showing a move toward integrated, fuel-saving features.

Next Step: Finance should draft a 13-week cash view by Friday, factoring in the TCO savings from xFE adoption to show a clear path to fleet modernization ROI.

Allison Transmission Holdings, Inc. (ALSN) - PESTLE Analysis: Technological factors

The technological landscape for Allison Transmission Holdings, Inc. is a high-stakes transition from its core fully automatic transmission dominance to a complex, electrified, and digitized future. You are seeing a dual challenge: a rapid shift toward zero-emission propulsion solutions and the urgent need to integrate your traditional products into the burgeoning world of telematics and Artificial Intelligence (AI) for predictive maintenance.

Allison's success in this environment hinges on how quickly it can scale its electric product line while defending its legacy market with advanced digital services. It's a race to diversify before the core market shrinks. The company's updated 2025 full-year net sales guidance of $3,075 million to $3,175 million shows the underlying strength, but the future growth driver must be electrification.

Rapid shift toward electrification, including Allison's eGen Power fully electric axles and hybrid systems

The industry's pivot to electric propulsion is the single biggest technological factor impacting Allison. The company's response is the eGen Power family of fully integrated zero-emission electric axles (e-Axles), which are direct replacements for traditional powertrains in commercial vehicles.

This portfolio is extensive, including models like the eGen Power 100D dual-motor e-Axle, which delivers a peak combined power of 648 kilowatts (kW) and supports a 23,000-pound gross axle weight rating (GAWR). The e-Axles are a critical strategic move, as they are power-agnostic, working with battery-electric, fuel cell, and range-extending hybrid applications. A key win is the integration of an eGen Power e-Axle into Oshkosh Corporation's North America zero-emission electric refuse collection vehicle, a high-demand vocational segment where Allison has historically been dominant.

Here's a quick look at the eGen Power portfolio's capabilities:

• eGen Power 100D: Dual motor, 648 kW peak power, for medium- and heavy-duty trucks.
• eGen Power 100S: Single motor, 324 kW peak power, for medium-duty and school bus applications.
• eGen Power 130D/130S: Variants designed for the heavier 13-tonne GAWR required in European and Asia Pacific markets.

Competitor innovation, like ZF's TraXon 2 Hybrid transmission, pressures Allison's core market

While Allison focuses on its fully automatic transmissions and new e-Axles, competitors are aggressively innovating within the hybrid space, specifically by enhancing Automated Manual Transmissions (AMT). This directly pressures Allison's core business, as these hybrid AMTs offer compelling fuel efficiency gains.

ZF's TraXon 2 Hybrid AMT, for example, is a direct threat, offering significant fuel and CO₂ savings. This system offers a powerful, quantifiable value proposition to fleet managers who are not yet ready for a full battery-electric vehicle (BEV) transition but need to meet sustainability targets and lower operating costs.

The TraXon 2 Hybrid is a strong transitional product. Allison must demonstrate that the total cost of ownership (TCO) for its conventional and eGen hybrid systems remains superior to these increasingly efficient AMT-based hybrid alternatives.

Growing adoption of telematics and AI-driven predictive maintenance requires transmission integration

The rise of the connected vehicle is driving a fundamental shift in service and maintenance, moving from reactive repairs to predictive maintenance (Prognostics). This is a massive market, with the global automotive predictive analytics market expected to be valued at US$2.3 Billion in 2025, and predictive maintenance commanding nearly a 45% revenue share.

Allison is addressing this with Allison Connected Services, a platform that integrates transmission health data directly into fleet management systems. This service provides critical maintenance insights, including oil life, filter life, and clutch health, allowing fleets to maximize uptime. The company's partnership with Mack Trucks, which fully commercialized the integrated Allison Transmission monitoring within Mack's GuardDog Connect telematics solution in 2025, is a key strategic move. The pilot program for this integration reported achieving 100% customer satisfaction, a strong metric for a service-based technology offering.

Continued investment in Automated Manual Transmissions (AMT) by competitors, though Allison focuses on full automatics

The competitive landscape is defined by the fundamental difference in transmission philosophy: Allison's long-standing focus on the superior performance and ease-of-use of its fully automatic transmissions versus the fuel-efficiency focus of AMT makers. While Allison has historically eschewed AMTs, the continued investment by competitors like ZF in their AMT platforms, even as they add electrification, means the AMT value proposition remains a persistent threat.

Allison is fighting this by continuously improving its core products, such as the new 9-Speed fully automatic transmission for medium-duty applications, which offers over 50% improvement in gear ratio coverage compared to its 6-speed predecessor. Still, the AMT segment, especially with its hybrid variants, continues to erode the market share of conventional automatic transmissions in certain long-haul and regional-haul segments.

Allison's strategy is clear: double down on the fully automatic experience for internal combustion engine (ICE) vehicles while aggressively pushing the fully electric e-Axle. It's a binary bet that avoids the middle ground of AMT hybrid technology.

Allison Transmission Holdings, Inc. (ALSN) - PESTLE Analysis: Legal factors

You're looking for the legal tripwires and tailwinds that will shape Allison Transmission Holdings, Inc.'s (ALSN) balance sheet into 2026, and honestly, the legal landscape is creating more immediate change than the technology shifts right now. The biggest near-term legal risks aren't lawsuits; they are contract expirations and pending regulatory approvals. We're talking about a major brand divorce with General Motors and the final hurdle for a $2.7 billion acquisition that will redefine the company.

All regulatory approvals received for the $2.7 billion Dana Off-Highway acquisition as of November 2025.

The legal process for Allison Transmission's acquisition of Dana Incorporated's Off-Highway business for approximately $2.7 billion is in the final stages, but it is not yet fully complete as of November 2025. The transaction, which was approved by both companies' Boards of Directors, is still expected to close late in the fourth quarter of 2025, pending customary regulatory approvals.

This is a transformative legal event, expanding Allison's global footprint into over 25 countries and adding roughly 11,000 employees in sectors like construction, agriculture, and mining. The legal certainty of the deal closing is critical because the company expects it to be immediately accretive to earnings per share and generate annual run-rate synergies of roughly $120 million.

Here's the quick math on the deal's financial impact:

US EPA 2027 emissions standards create a complex pre-buy and technology transition environment.

The US Environmental Protection Agency's (EPA) new Phase 3 greenhouse gas (GHG) and ultra-low Nitrogen Oxide (NOx) emissions standards for model year 2027 are creating a significant legal and market distortion. This regulatory pressure is expected to drive a strong 'pre-buy' of current, less-complex diesel trucks in late 2025 and 2026 as fleets seek to avoid the higher upfront costs and maintenance risks associated with the new compliance technology.

The rules also mandate an annually increasing percentage of zero-emission vehicles (ZEVs) for manufacturers, which complicates Allison's product strategy. The legal requirement forces a technology transition, but the market is responding with a short-term surge in demand for the older, reliable diesel models. That's a near-term boost, but a long-term transition risk.

• 60% ZEVs for light-heavy vocational vehicles by MY 2032.
• 40% ZEVs for medium-heavy vocational vehicles by MY 2032.
• 30% ZEVs for heavy-heavy vocational vehicles by MY 2032.

Long-standing license agreement with General Motors for HD trucks is ending on December 31, 2025.

This is a clean break. The license agreement allowing General Motors (GM) to use the Allison Transmission trademark on its heavy-duty (HD) pickup trucks-specifically the Chevrolet Silverado HD and GMC Sierra HD-will expire on December 31, 2025, and will not be extended.

The key legal point here is that the agreement was primarily a trademark license; GM has been building its own 10-speed automatic transmission (the 10L1000) since 2018, with Allison providing design validation. The loss is a branding hit, not a loss of a core transmission sale. GM will stop applying Allison badges on new pickups starting in December 2025, and dealers must remove all Allison branding from unsold inventory by June 29, 2026.

UK's 'Simpler Recycling' legislation (mandatory food waste collection) drives new vehicle procurement in Europe.

Across the pond, the UK's 'Simpler Recycling' legislation is a clear legal driver for new vocational truck sales, a core market for Allison. The new regulations, which came into force for most businesses in England on March 31, 2025, mandate the separate collection of food waste and dry recyclable materials.

This legal requirement forces local authorities and commercial waste collectors to overhaul their collection systems, which means buying new or re-specifying existing refuse collection vehicles (RCVs). These RCVs are a primary application for Allison's fully automatic transmissions, benefiting the company's European on-highway revenue stream. Micro-firms (fewer than 10 full-time employees) have an exemption until March 31, 2027, but the bulk of the market-driving change is already in effect.

Allison Transmission Holdings, Inc. (ALSN) - PESTLE Analysis: Environmental factors

Stricter global Greenhouse Gas (GHG) and fuel efficiency standards (e.g., EPA) push demand for low-emission solutions.

The regulatory environment is rapidly intensifying, creating both a compliance challenge and a clear market opportunity for Allison Transmission Holdings, Inc. The U.S. Environmental Protection Agency (EPA) introduced its Phase 3 Greenhouse Gas (GHG) emission standards in April $\mathbf{2024}$, targeting substantial reductions for heavy-duty vehicles (HDVs) for model years $\mathbf{2027}$ through $\mathbf{2032}$.

This mandate requires manufacturers to achieve up to a $\mathbf{60\%}$ emissions reduction for vocational trucks and $\mathbf{40\%}$ for tractor trucks by model year $\mathbf{2032}$. Allison's long-standing support for these standards, dating back to the Phase 2 program, positions their fuel-efficient automatic transmissions as a critical compliance tool for Original Equipment Manufacturers (OEMs). The market is moving fast, so you need a partner that helps you hit these $\mathbf{2032}$ targets now.

The EPA's Phase 3 program is projected to cut $\mathbf{1}$ billion metric tons of CO2 emissions and generate $\mathbf{\$13}$ billion in annual benefits by $\mathbf{2055}$, underscoring the long-term economic and environmental shift.

Allison's xFE (extra Fuel Economy) transmissions deliver reported fuel savings of 4.8% in vocational fleets.

Allison's xFE technology, which stands for extra Fuel Economy, is a direct response to the pressure for better fuel consumption. These transmissions achieve fuel savings by incorporating a redesigned torque converter damper that enables earlier lock-up in first range and operates at lower engine speeds in higher ranges. This is a simple mechanical change with a big impact on your bottom line.

Real-world operational trials conducted in the UK on refuse collection vehicles showed the Allison $\mathbf{3000}$ xFE and $\mathbf{3200}$ xFE transmissions delivered an average fuel saving of $\mathbf{4.8\%}$ compared to their previous performance with standard Allison transmissions. For city and transit buses, the xFE technology can improve fuel economy by up to $\mathbf{7\%}$, specifically designed for the constant start-stop duty cycles of urban environments.

The fuel savings translate directly into reduced carbon dioxide (CO2) emissions, supporting the theoretical CO2 emissions saving calculated using the European VECTO fuel consumption tool of up to $\mathbf{3.7\%}$ on the Municipal Utility cycle.

Commitment to sustainability, including ISO 14001 certification at five global manufacturing sites.

Allison Transmission demonstrates its commitment to environmental stewardship through formal, verifiable certifications. The company maintains the ISO $\mathbf{14001}$ Environmental Management System certification at $\mathbf{five}$ of its global manufacturing sites. This certification, which is valid through December $\mathbf{1, 2025}$, confirms a systematic approach to managing environmental aspects, reducing impact, and ensuring regulatory compliance.

Furthermore, the Indianapolis global headquarters has maintained a Zero Waste to Landfill status since $\mathbf{2009}$, diverting over $\mathbf{99\%}$ of production waste from landfills. This is a defintely strong operational metric that shows a long-term, embedded commitment to sustainability beyond just product design.

• ISO $\mathbf{14001}$ Certified Manufacturing Sites: $\mathbf{5}$ global locations
• Indianapolis Headquarters Waste Diversion: Over $\mathbf{99\%}$ from landfill since $\mathbf{2009}$

Developing products compatible with alternative combustible fuels like natural gas and propane to reduce emissions.

Allison's strategy is to be 'fuel agnostic,' offering propulsion solutions that pair with a variety of energy sources, giving customers the power of choice as they transition away from traditional diesel. This is smart risk mitigation.

The company's fully automatic transmissions are compatible with a range of alternative combustible fuels, including natural gas, propane, and biogas, alongside hydrogen fuel cell and battery electric systems. The Allison $\mathbf{4500}$ RDS Model, for example, was paired with the Cummins X15N Natural Gas Engine in October $\mathbf{2025}$, a key development for enhanced performance and efficiency in the near-term. Allison's torque converter technology is crucial here, as it compensates for the lower power often associated with natural gas engines, ensuring performance is not sacrificed for cleaner air.

The Vehicle Electrification + Environmental Test (VE+ET) Center, a $\mathbf{60,000}$-square-foot facility, supports the development of these solutions, offering testing for hydrogen fuel cell and compressed natural gas (CNG) vehicles, accelerating the market readiness of low-emission alternatives.