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The Biden administration will ask Congress to expand the incentives that have boosted a U.S. electric vehicle market that still lags EV adoption in economic rival China.
The proposed extension for breaks on electric vehicle purchases is part of a $ 2.25 trillion infrastructure and stimulus plan called “The American Jobs Plan” that Biden is expected to announce in Pittsburgh on Wednesday afternoon, some details of which have been released by the White House.
Biden’s proposal includes long-awaited updates to roads, airports and other parts of America’s infrastructure, but as part of his campaign promise, the plan aims to advance the fight against climate change. . In addition to stimulating purchases of electric vehicles, the plan provides for more charging infrastructure and electric school buses. Republicans in Congress say they are worried that corporate tax proposals to fund the plan could slow an economy emerging from the COVID-19 crisis.
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Rebate and extension of the tax credit
Consumers and investors will note that Biden is asking Congress to maintain tax incentives that encourage more motorists to purchase electric vehicles. These tax credits are currently valued at $ 7,500 per purchase, but Tesla Inc. TSLA,
and General Motors Co. GM,
have already exceeded an existing cap of 200,000 per manufacturer at which the value of these credits gradually decreases.
Biden calls on Congress to “give consumers point-of-sale discounts and tax incentives to purchase electric vehicles made in the United States, while ensuring that these vehicles are affordable for all families and made by workers with good jobs, ”the White House said.
Senator Debbie Stabenow and Representative Dan Kildee, both Democrats from the former auto state of Michigan, are working with the White House and Democratic leaders on a plan to lower the cap to 200,000 vehicles.
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Washington is also considering a change to the current structure of tax incentives to better target the tax credit to middle and low-income car owners – a change that was part of the Biden campaign tax plans, according to the Tax Policy Center. .
The US market share of plug-in electric vehicle sales is one-third the size of the Chinese electric vehicle market.
“The president believes that must change. He is proposing an investment of 174 billion dollars to win the EV market, ”the White House said in its press release. “His plan will allow automakers to boost national supply chains from raw materials to parts, retool factories to be globally competitive, and help American workers make batteries and electric vehicles.
Automakers should applaud the proposal as they have tried and failed in the recent past to secure the extension of the electric vehicle tax credit through lobbying efforts.
Market reaction
“With potentially $ 200 billion, or roughly 10% of that plan for gossip-based EV initiatives off the Beltway, we believe the street ultimately needs to see two components to go through the House and be enacted for. ‘game changer’ for the Electric Vehicle Sector in the United States, ”said Daniel Ives, analyst at Wedbush.
“First, an extension of the tax credits currently valued at $ 7,500 for electric vehicles to the range of $ 10,000 or potentially more in a tiered system. Other point-of-sale discounts could also be included in this vast infrastructure bill to entice consumers to take the EV route, ”Ives said. “Second, we expect to see a lift of the 200,000 per manufacturer cap on credits being phased out, which will restore electric vehicle tax credits for the Tesla and GM pillars.”
Tesla shares, which had jumped 580% in the past year, fell in early 2021, down about 7% since the start of the year. The stock was up 3% on Wednesday as new EV incentives hit the markets.
Not to be outdone, traditional automakers have increased investments in electric vehicles and autonomous vehicles. In fact, GM has said it will phase out internal combustion engine vehicles within 15 years.
“Battery life will only be prolonged and with the trillions invested worldwide by all who support the electrification of the transportation system, the infrastructure for widespread adoption and use of EV technology.” will only increase, ”said John Mitchel, analyst at Blue Horizon Claudia Assis.
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GM shares are up 199% year-to-date and 38% year-to-date. Electric vehicle shares focused on trucks Nikola Corp. NKLA,
and Workhorse Group Inc. WKHS,
also saw high-profile gains cool down in early 2021.
ETF DRIV Global X Autonomous and electric vehicles,
was trading higher earlier on Wednesday.
Growth stocks – with EV counted in the group – have been hit by a rotation to value stocks that include airlines and restaurants, particularly as COVID-19 vaccinations spread.
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Other climate change tax incentives featured in Biden’s Wednesday announcement include the proposed expansion of a tax credit to create underground storage for carbon capture and an investment tax credit. focused on electric transport. Biden’s initiative would also give a 10-year extension of tax credits that have been a boon for wind, solar and other renewable energy projects.
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