Biden Waters Millions To The Electric Car Industry

The new Inflation Reduction Law contemplates a series of incentives and subsidies to reequip battery and electric vehicle factories and build new ones. Companies like Tesla, General Motors, Ford Motor, Volkswagen or Panasonic could benefit from the initiative.

The legislative machinery of the United States has not stopped in August, since in four months there will be parliamentary elections in the North American country. If last week Joe Biden signed the CHIPS Act to boost production and research in the field of semiconductors, the president this week signed the Inflation Reduction Act , which “will reduce costs for families, combat the climate crisis , it will reduce the deficit and, finally, it will ask the largest companies to pay their fair share [of taxes]”, as described by the White House rule on its website.

The bill approved by the Senate and later signed by Biden reserves more than 15,000 million dollars to reequip battery and electric vehicle factories and build new ones, according to The Wall Street Journal published a few days ago .

However, what has not been liked in the automobile industry is that the law also makes it more difficult for consumers to access tax deductions for the purchase of an electric vehicle. ” The tax relief could especially benefit Tesla for its huge market share of electric vehicles, approximately 70% of sales in the United States,” according to the investment bank Evercore ISI, in information collected by the Journal .

The tax subsidy would make Tesla models cheaper than the gasoline vehicles that still dominate the lines of traditional rivals.

However, incentives and subsidies for the production of electric vehicles could benefit, in addition to Tesla, other American car manufacturers, such as General Motors and Ford Motor , as well as companies involved in the manufacture of electric batteries and charging stations. , case of Albemarle , Honeywell International and NextEra Energy ; but also foreign firms with factories on North American soil, such as the German Volkswagen and the Japanese Panasonic .

Indeed, Panasonic – one of Tesla’s main suppliers – announced at the end of July that it was building a $4 billion electric vehicle battery factory in Kansas as a way to compete in the increasingly competitive field of electric vehicles. batteries and ease the pioneer’s reliance on electric vehicles, Forbes reported. This is his second factory there (he has another in Nevada).

However, there are those who believe that the charging infrastructure is still insufficient to switch to an electric model. Sales of electric and plug – in hybrid vehicles in the US doubled to exceed 600,000 during 2021 , with sales figures showing electric vehicles have reached 6.6% of total cars sold in recent weeks as they rise gasoline prices,” explains Christopher Gannatti, WisdomTree’s global director of analytics.

“Outside of California -indicates the expert-, the network of chargers necessary to serve millions of electric vehicles does not yet exist. The Biden Administration is betting on the installation of 500,000 public chargers by 2030, but McKinsey & Co. estimates that they will need around 1.2 million”.

If you are considering investing in this sector, you should know that companies such as General Motors, Albemarley, and NextEra Energy receive a buy recommendation from the consensus of analysts compiled by FactSet. Still, in the case of GM, Deutsche Bank’s research team downgraded its advice from buy to hold a few weeks ago.

“While earnings should improve in the second half of the year, benefiting from higher volume as supply bottlenecks are resolved, we believe these should not be capitalized on amid the eventual high risk to commodity prices. vehicles ,” they pointed out.

“At the same time, despite GM’s encouraging progress in sourcing battery materials, we are concerned that EV margins could continue to weigh heavily on the company’s overall profitability in the near term, until the automaker can introduce its next-generation technology and ramp up output at its battery plants to full capacity,” Deutsche Bank warned.

Something similar was pointed out by the German entity about Ford Motor: “We are concerned about the impact that its electric vehicles could have on the company’s profitability in the coming years, amid considerable negative contribution margins from its electric vehicle portfolio, at least until its second generation.

What happens with these firms will have to do with the price of lithium, used for the production of batteries. “The possible trajectory of lithium prices has large impacts, for example, shares of companies such as General Motors and Ford Motor Company may be affected if investors believe that lithium prices will remain elevated for a longer period,” he warns. Gannatti.

Thus, Albemarle, which is one of the largest suppliers of lithium for electric car batteries, will increase its production capacity by 85% this year. For Deutsche Bank, “lithium will continue to be a license for Albemarle to print money in the future.”

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