The US Climate Bill could be a “significant tailwind” for Tesla and several other electric car makers, says Goldman Sachs. While Tesla will be one of the biggest beneficiaries, the benefits for other manufacturers will depend on how much effort they are willing to put into developing the industry.
Goldman Sachs analyst Mark Delaney reflects on the new US Climate Bill, which has yet to be passed. The Senate proposes to pass the “Inflation Reduction Act of 2022,” which provides for significant financial incentives for the industry in the coming years to develop it in the US. In accordance with it, over the next ten years, almost $370 billion will be allocated for projects in the field of energy security and climate change projects.
Among other things, the bill proposes funding for electric vehicle tax credits, as well as the renewal of 30C EV charging tax credits, and a 30% investment tax credit for solar and storage for 10 years. Clearly, Tesla has the upper hand on all counts.
One of the key points is that Tesla, GM, and Ford would benefit from the new legislation that removes the tax credit cap after automakers have sold 200,000 electric vehicles. Among the conditions for this is that electric vehicles and most of their battery components must be assembled in North America. The batteries must also contain a certain percentage of minerals from countries that have free trade agreements with the US. Used vehicles will also receive a $4,000 tax credit. This tax credit also includes electric sedans up to $55,000, meaning the base Tesla Model 3 should be eligible.
Delaney believes the eventual adoption could be “a significant tailwind for several stocks in our coverage, including for select OEMs that had reached or were near hitting the prior 200K cap (including Tesla, GM and Ford).”
“It's unclear to what extent the bill would expand EV unit volume in the US in the near to intermediate term, but we think it would have an upward bias (and even without further policy support, we expect US EV mix to increase to 20% in 2025 and 50% in 2030),” Delaney added in a research note.
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