The recent climate bill agreement between the Democratic caucus has sent energy stocks soaring, especially companies linked to renewable energy. This negotiation helps President Biden’s agenda for moving towards clean energy, but there are some problems that companies are raising their concerns about.
One part of the Schumer-Manchin deal is changes to the EV tax credit to incentivize consumers to purchase EVs. In this new deal, the government will extend the $7,500 tax credit for electric vehicles under new circumstances. Companies selling EVs for more than $80,000 will be ineligible for the credit, along with buyers who earn more than $150,000 per year. This has caused some backlash from EV companies like Rivian, who produce electric SUVs and trucks. Sedans and other small car types sell for less than big vehicles like Rivian makes for obvious reasons, and this places the company at a disadvantage. Rivian said that most of their vehicles sell for more than $80,000, and electric vehicles in general cost more. The CEO said that high prices are necessary for this early technology, and these rules would prevent them from scaling production like how other companies are able to. The EV sector has an issue with the current legislation that states that federal tax credits start to fade out after a company has sold 200,000 electric vehicles, which has the big giants unhappy. Tesla, GM, and Toyota have already reached this cap, and this bill does have a solution for that. The Schumer-Manchin deal would lift the 200,000 cap as long as EV companies produce at least half of their battery components in the US, and that number needs to rise to 100 percent by 2028. This ensures that the US economy will be the ones benefiting from this, and it is truly a good incentive. This bill will likely have tweaks in the future, so people aren’t worried too much about this yet.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.