Biden's Infrastructure Plan Includes $174 Billion for EVs, Analyst Says Tax Credit Expansion Key for the Sector

March 31, 2021 9:32 AM EDT
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A huge infrastructure plan that is due to be presented today by President Joe Biden includes $174 billion to support the electric vehicle (EV) market, as well as new funds for renewable power.

In a major push towards a more clean and green economy, Biden will seek fresh funding from Congress to accelerate efforts to decarbonize the U.S. economy by 2050.

The White House is seeking to increase the production of EV components and batteries and help customers choose to buy an EV instead of a traditional car. Rebates and tax incentives will be available for Americans to buy EVs “while ensuring that these vehicles are affordable for all families and manufactured by workers with good jobs.”

These grants will support building a national network of 500,000 EV chargers by 2030.” The plan will also work to have 50,000 diesel transit vehicles replaced, in addition to electrifying at least 20% of school buses.

Wedbush analyst Dan Ives said that the Street “has been awaiting this day since Biden was elected into 1600 Pennsylvania Avenue back in November.” The combination of a Democrat in the White House and a Blue Senate paved the way for a “green tidal wave in the US to kick off with electric vehicles the centerpiece.”

“We believe the Street ultimately needs to see two components to pass through the House and get enacted to "change the game" for the EV sector in the US. First, an expansion of the tax credits currently valued at $7,500 for EV vehicles to the $10k range or potentially higher in a tiered system. Other point-of- sale rebates could also be put into this wide ranging infrastructure bill to catalyze consumers to head down the EV path,” Ives wrote in a note.

Ives reminds clients that EVs today represent 2% of auto sales, which is lower than 4.5% in China and 3% globally. Recent announcements from Ford (NYSE: F) and General Motors (NYSE: GM) show that the US is catching up the rest of the world on EVs.

“Second, we expect to see a lifting of the 200,000- per manufacturer ceiling on the credits being phased out which will restore the EV tax credits for stalwarts Tesla and GM. Another linchpin of these EV initiatives will be centered around massive expansion of charging stations around the US over the next decade. Today there are roughly 100k public charging ports with another 300k/400k needed over the next decade to support this groundswell EV green tidal wave for consumers/trucking,” Ives adds.

Ives takes note of the recent pullback in EV stocks, with Tesla (NASDAQ: TSLA) trading about 30% off the record highs. The analyst reiterates that a multi-year upward rally is still intact. Wedbush analysts project the EV market to represent a $5 trillion TAM over the next decade.

“The EV investing landscape is bigger than just the auto makers as over the coming years the Street will have an enormous ecosystem of EV battery players (QS among others), green driven EV recycle pure plays (Li-Cycle), and super charger infrastructure vendors driving this transformational market still in the early days of playing out. In the US, there are many pure play innovative EV players (consumer/ commercial) on the horizon poised to capitalize on a Biden driven green tidal wave domestically with our expectations that the tax credits and incentives around EVs will ramp significantly in the coming years,” Ives stresses.

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