Beginning in January 2024, EV buyers will receive an immediate $7,500 tax credit upfront at the dealership. The announcement promises to spark EV sales and revenues when it is adopted, and that makes preemptive purchases of such stocks attractive.
Analysts including S&P Global Mobility’s Stephanie Brinley note that the move simplifies the purchase process. The instant rebate at the point of sale eliminates the need to wait for a rebate after filing with the IRS. Brinley notes that simplicity is preferable.
Further, the instant rebate serves to lower monthly payments which is another prime motivating factor for buyers. The lower barriers, in turn, should serve to spike sales and revenues of certain EV stocks more so than others.
Tesla (TSLA)
Let’s start with Tesla (NASDAQ:TSLA) and its stock. It’s the clear leader in the EV sector and is set to receive a huge boost on the news.
Tesla sells a lot of vehicles in general and 3 of the 4 most sold EVs in 2022. It will clearly benefit for the reasons already mentioned above. Let’s dig a little deeper because Tesla is an especially strong pick because of its California sales base.
The company sold more than 71,000 Model Ys and nearly 42,000 Model 3s in California during H1. Take, as an example, the Model 3. It retails for $39,000 in its base model form. The new incentives make it much easier to buy and California’s additional state rebates mean prices are much lower than $39,000. The overall incentive structure in the state means that buyers will now be able to get a Model 3 for $22,000.
I fully expect that Tesla’s dealerships in California are scrambling at the moment to adopt the new rules. The dealers will now be responsible for collecting the credit as it has transferred from buyer to dealer. There’s a lot of money to be made.
Ford (F)
Ford (NYSE:F) hasn’t received much in the way of positive news of late. The UAW strike continues and its stock is likely to be affected negatively as a result.
Union worker strikes have the potential to negatively affect production of all of Ford’s vehicles. However, the UAW is strategically targeting certain areas of production. A shutdown of Ford’s high-margin truck production was averted earlier after the company acquiesced. Now Ford has threatened to cut shifts at its F-150 Lightning plants as the talks roll on.
That makes it difficult for bystanders to judge how the updated EV tax credits will affect Ford overall. That said, Ford does benefit, especially considering that its Mustang Mach-E was the third most sold EV in the U.S. in 2022. So far, the UAW strikes haven’t affected its production which remains a positive overall for the firm. Strikes aside, consumers are going to respond positively to the changes and that will serve to spike demand for Ford’s EVs.
Rivian (RIVN)
Rivian (NASDAQ:RIVN) stock had been in need of positive news following a rough start to October. The most important piece of news in relation to the new rebate structure is Rivian’s lower sales estimates. The company recently announced that Q3 sales are expected to be lower than what analysts were expecting. The new rebate structure materially changes that for the positive in favor of Rivian.
The news also helps because Rivian has other troubles that have created selling pressure. For one, Rivian is burning through cash. Its trucks sell for an average loss of $33,000. That isn’t to be unexpected though. The economics of car manufacturing start to make sense at scale. Ford actually lost more per EV sold during the same period, so that should offer RIVN shareholders some solace.
As if that weren’t enough, Rivian also announced a convertible note sale worth $1.5 billion. That’s an additional $1.5 billion in debt and an option to convert that debt to shares creating dilution potential. Does it sound appealing? If it doesn’t, consider that prominent analysts believe Rivian has dropped all the bad news it will for a while. That’s a positive and demand will now be higher as buying ease falls due to the updated tax credit schemes.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.