Tesla stock rose Wednesday on the White House’s infrastructure plan.
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The White House released an outline of its roughly $2 trillion infrastructure plan ahead on Wednesday of President Joe Biden ‘s Pittsburgh speech. Electric vehicle would be big winners from the proposed spending.
That’s good news for all EV investors, and it’s especially good for Tesla (ticker: TSLA). Tesla stock is up about 1.7% in recent trading. The Dow Jones Industrial Average, for comparison, was flat.
The Biden plan intends to “create good jobs electrifying vehicles,” adding, “U.S. market share of plug-in [EV] sales is only one-third the size of the Chinese EV market. The President believes that must change.”
Biden is proposing a $174 billion investment to help the grow the domestic supply chains so U.S. auto makers can “compete globally” in the EV market. Importantly, the plan will provide point-of-sale rebates and tax incentives to buy “American-made EVs.”
American-made doesn’t mean that foreign auto makers are shut out of incentives. Many foreign-branded cars are made in the U.S., though the language might complicate things a little for the likes of BMW ( BMW. Germany) and Volkswagen (VOW.Germany). The White House wasn’t immediately available to clarify.
Wall Street will likely focus on the incentives. There is already a federal tax credit of $7,500 for EV purchases, but the credit runs out after a company sells 200,000 EVs. Tesla, for instance, has sold too many EVs for Tesla buyers to get the $7,500 federal credit, though several states still have their own incentives.
The size of the new credit and any vehicle cap, or lack of a cap, isn’t included in the White House summary. But $174 billion is a lot of money for the sector: It works out to about $580,000 per plug-in EV sold in the U.S. in 2020. Of course, a lot of the $174 billion will end up in things such as charging infrastructure.
Roughly 300,000 plug-in electric vehicles were sold in the U.S. in 2020. That number is expected to grow rapidly. Wall Street, for instance, expects Tesla deliveries to rise about 60% year over year in 2021.
Wedbush analyst Dan Ives expects the federal tax credit to go up to $10,000. He also expects the tax credit ceiling of 200,000 per manufacturer to be phased out. That ” will restore the EV tax credits for stalwarts Tesla and [ General Motors ],” added Ives his Wednesday report.
Federal support for EVs is welcome news for the sector, whose stocks have struggled recently. Tesla shares, for instance, are down about 29% from their 52-week high. The S&P 500 is up about 6% over the same span.
Tesla stock, however, bounced 4% Tuesday, partly in anticipation of the release of Biden’s plan.
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