If EVs are part of Biden’s infrastructure plan, it makes a big difference for car buyers and car companies alike. And the biggest winners of the largest electric vehicle manufacturer,
Right now, the government is giving a $ 7,500 tax credit on the car. However, there is one catch: each manufacturer has a limit of 200,000 electric vehicles sold in the US. If they sell more, the buyer cannot get a deduction. For example, Nissan did not sell 200,000, say, Leaf electric vehicles, so the buyer gets a deduction. The same is true for other EV makers – a deduction is still available – with the exception of two: Tesla (ticker: TSLA) and
GM supports tax breaks and exemptions from restrictions. In an essay on LinkedIn, President Mark Reuss called for “smart and effective public policy.” He focused on three key points: investment in fast charging stations that will increase consumer confidence in electric vehicles; incentives for buyers, including “a change in the tax credit for electric vehicles so that customers of early adopters such as GM are not subject to fines, and a change that entitles buyers of used EVs”; and investment tax breaks so that companies can build more electric vehicle factories in the United States.
Previously, analysts believed that Biden’s plan would lift the limit, but leave the loan amount at $ 7,500. They are now thinking about giving up the limit and a $ 10,000 loan, which would be what Wedbush analyst Dan Ives describes as a “goldilocks scenario in the eyes of the Street” and a spark plug for this sector.
Adam Jonas advises investors to prepare for an “EV infrastructure bill, including incentives to buy EVs.” The new federal push will benefit not only Tesla and old automakers like GM, but also electric car startups like Lucid Motors. Still, for Jonas, Tesla would be the biggest winner. “Put it all together, and we think car investors face a lot of risk if they don’t own Tesla shares.”
Both Ives and Jonas are Tesla bulls, recommending buying the stock. Ives’ target price is $ 1,000. Jonas’ target price is $ 880.
Tesla will come out on top due to the lifted restriction – and buyers will get their tax breaks back. And $ 10,000 is a hefty amount because an electric car is more expensive than a gasoline-powered car, because an electric car’s battery is more expensive than a gas tank.
Compare Tesla to two popular gas powered models. Tesla Model 3 starts at around $ 37,000. With a $ 10,000 tax credit, the purchase price drops to about $ 27,000.
(TM) Camrys and
(HMC) Chords start at around $ 25,000.
The same is true for other electric vehicles. Both the Chevy Bolt and Hyundai Kona start at around $ 37,000. Crossover Nissan Rogue and
CR-V both start at 25,000.
(F) Mach E starts at around $ 43,000. Tesla Model Y starts at around $ 40,000. Mach E version which Barron’s drove at a cost of about $ 60,000. Compact
) the crossover price also starts at about $ 60,000.
The tax rebate essentially cancels out the initial price difference, and the EV costs less to operate and maintain. At current gas and electricity prices, charging an electric car is cheaper than refueling a car. Maintaining one is also cheaper because, in essence, the electric car’s engine is less complicated. Much of the technology is in batteries that don’t move and can last hundreds of thousands of miles as long as a traditional car can stay on the road.
This does not mean that there are all pluses in electric vehicles. Differences in range still exist, and electric cars still take longer to charge than gasoline-powered cars. But closing the procurement gap would make many EVs more attractive, which would mean increased demand, which would affect EV stocks.
For Tesla, demand is not a problem. Tesla beat first-quarter delivery expectations. However, since the beginning of the year, the shares of the first electric car have dropped 4%. AT
Russell 1000 value index
has grown by about 12% since the beginning of the year; AT
Russell 1000 Growth Index
is about 4%.
The biggest reason Tesla is pulling: higher interest rates and equity. And GM is one of those value companies that benefit from rotation. Its shares are up about 47% since the beginning of the year.
Email Al Ruth at [email protected]