How EV Incentives Impact Auto Stocks
The revised federal tax credits for electric vehicles, driven by new battery sourcing requirements, benefit U.S. automakers like Tesla, GM, Ford, and Stellantis while leaving Hyundai, Kia, Nissan, and Volkswagen at a disadvantage, potentially impacting their stock performance.
avatar
Staff or Guest writer for The Dog of Wall Street.
2023-04-17 18:30

The federal tax credits for electric vehicles have recently undergone significant revisions, leaving car manufacturers and potential buyers uncertain about their benefits. The changes stem from new battery sourcing requirements that aim to incentivize U.S.-based production and were included in a massive climate bill that restructured the electric vehicle tax credit.
How EV Incentives Impact Auto Stocks
The IRS released an updated list of eligible vehicles on FuelEconomy.gov, which will take effect on Tuesday. U.S. automakers, particularly General Motors (NYSE: GM), are poised to gain the most from the new regulations. Popular models such as the Tesla Model Y and Chevy Bolt will still receive the full $7,500 credit, while other models will be eligible for a $3,750 credit. Some vehicles, including the VW ID.4 (OTCMKTS: VWAPY),Nissan Leaf (OTCMKTS: NSANY),and Rivians ($11.35|0.27%), will lose the credit altogether.

The new tax credits are divided into two separate credits worth $3,750 each. To qualify, vehicles must meet specific battery sourcing requirements. A portion of critical minerals, such as lithium, graphite, and cobalt, must be mined or processed in the U.S. or a trade partner country. Additionally, battery components like anodes, cathodes, and electrolytes must be manufactured or assembled in North America.

Tesla ($202.64|0.38%), Ford (NYSE: F), GM, and Stellantis are the remaining American automakers whose vehicles still qualify for the tax credit. However, foreign automakers, such as Hyundai, Kia, Nissan, and Volkswagen, have lost access to the tax credit due to their battery content lacking sufficient domestic or partner-country components.

To claim a tax credit, buyers must meet specific income caps and ensure their chosen vehicle meets battery size, weight, and assembly location requirements. The vehicle's sticker price must also be below $55,000 for cars and $80,000 for SUVs and trucks.

In 2024, the tax credit will change again, allowing buyers to receive it as an immediate discount on the vehicle price, making it accessible regardless of their tax bill size.

For used vehicles, a separate tax credit is available, with income caps and specific requirements, including purchasing the vehicle from a dealer and ensuring the vehicle has not already been claimed for the used vehicle tax credit. The vehicle must also be at least two years old, meet weight and battery size requirements, and have a purchase price of $25,000 or less.

Leased vehicles qualify for a separate $7,500 tax credit without restrictions on price, income, or assembly location. However, the credit goes to the leasing company, so buyers should ensure their contract passes the discount to them.

As automakers continue to adjust their supply chains to comply with the new regulations, more vehicles may qualify over time. Nevertheless, the requirements will increase each year, and new restrictions on Chinese components will soon take effect. Buyers should confirm their vehicle's eligibility for tax credits at the time of purchase.

In conclusion, the changes to the federal tax credits for electric vehicles have created both winners and losers in the automotive industry. Companies like Tesla, General Motors, Ford, and Stellantis (NYSE: STLA) stand to benefit from the revised regulations due to their compliance with battery sourcing requirements. As a result, these companies' stocks could potentially see an upward trend. On the other hand, automakers such as Hyundai, Kia, Nissan, and Volkswagen face disadvantages, as their vehicles no longer qualify for the tax credit due to insufficient domestic or partner-country content in their batteries. This development may negatively impact their stocks, making them less attractive to investors in the electric vehicle market.


Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Rate this article

positive
negative
Published On
2023-04-17 18:30

avatar
About the Author
Staff or Guest writer for The Dog of Wall Street.


buy-coffee
You've read 1 article in the last year
..thank you for supporting us and for visiting our site. Unlike many other sites, The Dog of Wall Street is available for everyone to read. Our focus is to provide great content for free. Do you like what we are doing? Buy us a cup coffee. It is the fuel that keeps us going..

NVIDIA Earnings: Will They Even Matter?
Let’s examine the bear and bull case for NVIDIA’s earnings next Wednesday.
By Mike Sakuraba | 2 weeks ago

2 Stocks I'm Avoiding as Markets Hit New All-Time Highs
People like to throw around the term bubble a lot when the market goes up a large amount in a short time. But is it really a bubble or did they just miss out on the action? I usually say it’s the latter.
By Mike Sakuraba | 3 weeks ago

2 Earnings Calls I'm Watching Next Week
It’s been a while since I’ve done this but it was a good practice and forced me to actually listen to the earnings calls of companies I invest in.
By Mike Sakuraba | 3 weeks ago

2 Stocks You Can Still Buy at All-Time Highs
For some reason, we have always been taught to try and buy low and sell high. While that might seem logical, it is a good way to miss out on buying some of the best stocks.
By Mike Sakuraba | 3 weeks ago

24 Assets to Invest in for 2024: Part 7
In Part 6, I spoke about chip stocks, Axon (NASDAQ: AXON),Celsius (NASDAQ: CELH),and the iShares Bitcoin Trust (NASDAQ: IBIT).
By Mike Sakuraba | 4 weeks ago

2 Stocks I'm Buying When Markets Pull Back
Here are 2 stocks I’m prepared to pull the trigger on as soon as the market pulls back.
By Mike Sakuraba | 4 weeks ago

24 Assets to Invest in for 2024: Part 8
In Part 7, I spoke about Rivian (NASDAQ: RIVN),Chainlink, and Evolution AB (OTC: EVVTY)
By Mike Sakuraba | 4 weeks ago

Tesla Bears Rejoice: Another Bad Quarter from Tesla
I think the next year or two is going to be tough for the company and the stock.
By Mike Sakuraba | 1 month ago