Investor's Corner
Why new EV incentives are the nail in the coffin for ICE manufacturers
The newly-revised electric vehicle incentive program, which is a part of President Biden’s Build Back Better plan, could officially spell the end of the combustion engine era in the American automotive industry. The new EV tax credit breakdown could award as much as $12,500 for an EV purchase, but that’s not the best part. As the EV industry continues to embrace new vehicle styles and expand to more consumers, the language in the bill reflects new body types and supports domestic manufacturing. Additionally, vehicles purchased from a unionized plant will provide an extra $4,500, with $500 more if US-produced batteries are used in the car.
Currently, $7,500 is offered to anyone who purchases an EV from a company in the United States that has not sold at least 200,000 units. GM and Tesla are the two manufacturers who are currently disqualified from utilizing the EV incentive because they have surpassed the 200k vehicle threshold.
Over the past several days, more details regarding the EV tax credit have been detailed, especially as revisions to the bill were made just a few days ago to include trucks, SUVs, and vans. Additionally, new income eligibility requirements have been lowered, which will disqualify more people from receiving the credit.
U.S. Senate Panel looks to boost EV Tax Credit to $12,500: What we know so far
Vehicle Type Price Caps
The latest modifications to the bill include price caps for body styles. SUVs up to $80,000 will now qualify, increased from the previous $69,000 cap. Trucks have also been increased to $80,000 from $74,000, and vans up to $80,000 in price will also now qualify. Sedans are included in the “Other” category and will be eligible at $55,000 and under.
Electric trucks will be a significant part of the U.S. EV market in the coming years. With Rivian beginning initial deliveries of the R1T earlier this month, the company will have to fend off stiff competition from the Ford F-150 Lightning, the GMC Hummer EV, and the Tesla Cybertruck. This market will become more robust in the coming years as pre-orders for the F-150 Lightning have reached 160,000, and the Cybertruck has peaked at 1.5 million reservations.
Income Limitation Revisions
Income limits have been lower to $500,000 for joint families, $375,000 for the head of household, and $250,000 for individual filers. These are relatively drastic reductions, especially as single filers were eligible with incomes of up to $400,000, and joint filers were not disqualified until the $800,000 yearly income mark. After all, the bill does state that the incentive is to make EVs more affordable for middle-class Americans.
The White House writes:
“The consumer rebates and credits included in the Build Back Better framework will save the average American family hundreds of dollars per year in energy costs. These measures include enhancement and expansion of existing home energy and efficiency tax credits, as well as the creation of a new, electrification-focused rebate program. The framework will cut the cost of installing rooftop solar for a home by around 30 percent, shortening the payback period by around 5 years; and the framework’s electric vehicle tax credit will lower the cost of an electric vehicle that is made in America with American materials and union labor by $12,500 for a middle-class family. In addition, the framework will help rural communities tap into the clean energy opportunity through targeted grants and loans through the Department of Agriculture.”
Used EVs now Qualify
Used EVs will also now qualify for the tax credit at a slightly reduced rate. According to CNET, the legislation in the Affordable EVs for Working Families Act will provide up to $2,500 for an individual filing their taxes who drives a used EV and has an income of less than $75,000 per year. Joint filers will have to make under $150,000 to qualify, and the EV has to be at least two years old and cost under $25,000 to qualify.
The Nail in the Coffin for ICE
It is no secret that EVs will begin to displace a significant number of ICE vehicles on the road in the coming years. While many manufacturers have announced plans to scrap ICE production altogether, goals and timelines are not always met. However, incentivizing consumers to purchase electric vehicles is a great way to surge the EV movement forward. Seeing that many families and individuals will qualify for hefty tax credits worth various amounts, more consumers may tend to lead toward the quickly-growing EV sector.
Now that incentives have been announced for additional body styles, the expansion of the EV sector is providing more options for consumers who need more than a daily driver to accomplish everyday tasks. With the introduction of several electrified pickups and SUVs, consumers can consider more versatility, as the need for a pickup or SUV for personal reasons is no longer an excuse not to buy electric.
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Tesla (NASDAQ: TSLA) is being called “the biggest meme stock we’ve ever seen” by Yale School of Management Senior Associate Dean Jeff Sonnenfeld, who made the comments in a recent interview with CNBC.
Sonnenfeld’s comments echo those of many of the company’s skeptics, who argue that its price-to-earnings ratio is far too high when compared to other companies also in the tech industry. Tesla is often compared to companies like Apple, Nvidia, and Microsoft when these types of discussions come up.
Fundamentally, yes, Tesla does trade at a P/E level that is significantly above that of any comparable company.
However, it is worth mentioning that Tesla is not traded like a typical company, either.
Here’s what Sonnenfeld said regarding Tesla:
“This is the biggest meme stock we’ve ever seen. Even at its peak, Amazon was nowhere near this level. The PE on this, well above 200, is just crazy. When you’ve got stocks like Nvidia, the price-earnings ratio is around 25 or 30, and Apple is maybe 35 or 36, Microsoft around the same. I mean, this is way out of line to be at a 220 PE. It’s crazy, and they’ve, I think, put a little too much emphasis on the magic wand of Musk.”
Many analysts have admitted in the past that they believe Tesla is an untraditional stock in the sense that many analysts trade it based on narrative and not fundamentals. Ryan Brinkman of J.P. Morgan once said:
“Tesla shares continue to strike us as having become completely divorced from the fundamentals.”
Dan Nathan, another notorious skeptic of Tesla shares, recently turned bullish on the stock because of “technicals and sentiment.” He said just last week:
“I think from a trading perspective, it looks very interesting.”
Nathan said Tesla shares show signs of strength moving forward, including holding its 200-day moving average and holding against current resistance levels.
Sonnenfeld’s synopsis of Tesla shares points out that there might be “a little too much emphasis on the magic wand of Musk.”
Elon Musk just bought $1 billion in Tesla stock, his biggest purchase ever
This could refer to different things: perhaps his recent $1 billion stock buy, which sent the stock skyrocketing, or the fact that many Tesla investors are fans and owners who do not buy and sell on numbers, but rather on news that Musk might report himself.
Tesla is trading around $423.76 at the time of publication, as of 3:25 p.m. on the East Coast.
Elon Musk
Elon Musk affirms Tesla commitment and grueling work schedule: “Daddy is very much home”
The remarks came as Tesla shares crossed the $400 mark on the stock market.
Tesla CEO Elon Musk reiterated his commitment to the electric vehicle maker and its future projects this week, responding to speculation following his $1 billion purchase of TSLA stock.
The remarks came as Tesla shares crossed the $400 mark on the stock market, extending a rally fueled in part by Musk’s TSLA purchase.
Elon Musk’s nonstop work schedule
Amidst the reaction of TSLA stock to Musk’s $1 billion investment, Tesla owners such as @greggertruck noted that “Daddy’s home.” Musk replied, stating that “Daddy is very much home.” He then shared details of a packed weekend of work, which was definitely grueling but completely within character for a “wartime CEO.”
Musk did note, however, that he had lunch with his kids during the weekend despite his extremely busy schedule.
“Daddy is very much home. Am burning the midnight oil with Optimus engineering on Friday night, then redeye overnight to Austin arriving 5am, wake up to have lunch with my kids and then spend all Saturday afternoon in deep technical reviews for the Tesla AI5 chip design.
“Fly to Colossus II on Monday to walk the whole datacenter floor, review transformers and power production (excellent progress), depart midnight. Then up to 12 hours of back-to-back meetings across all Tesla departments, but with a particular focus on AI/Autopilot, Optimus production plans, and vehicle production/delivery,” Musk wrote in his post.
Wartime CEO
Wedbush analyst Dan Ives described Musk as operating in “wartime CEO mode,” highlighting autonomous driving and AI as a trillion-dollar market opportunity for Tesla. Musk reiterated this point late last month as well, when he outlined the several projects he is juggling among his numerous companies. At the time, Musk stated that he was busy with Starship 10, Grok 5, and Tesla V14. This was despite his notable presence on X.
With Tesla Master Plan Part IV being partly released, the company is entering what could very well be its most ambitious stage to date. To usher in an era of sustainable abundance, Tesla would definitely require a “wartime CEO,” someone who could remain locked in and determined to push through any obstacles to ensure that the company achieves its goals.
Elon Musk
Tesla analyst says Musk stock buy should send this signal to investors
“With Musk’s (Tesla stock) purchase, combined with the upward momentum for delivery expectations and robotaxi rollout, we are becoming more bullish.”
Tesla CEO Elon Musk purchased roughly $1 billion in Tesla shares on Friday, and analysts are now breaking down the move as the stock is headed upward.
One of them is William Blair analyst Jed Dorsheimer, who said in a new note to investors on Monday that Musk’s move should send a signal of confidence to stock buyers, especially considering the company’s numerous catalysts that currently exist.
Elon Musk just bought $1 billion in Tesla stock, his biggest purchase ever
Dorsheimer said in the note:
“With Musk’s (Tesla stock) purchase, combined with the upward momentum for delivery expectations and robotaxi rollout, we are becoming more bullish. This purchase is Musk’s first buy since 2020. To us, this sends a strong signal of confidence in the most important part of Tesla’s future business, robotaxi.”
Musk putting an additional $1 billion back into the company in the form of more stock ownership is obviously a huge vote of confidence.
He knows more than anyone about the progress Tesla has made and is making on the Robotaxi platform, as well as the company’s ongoing efforts to solve vehicle autonomy. If he’s buying stock, it is more than likely a good sign.
Tesla has continued to expand its Robotaxi platform in a number of ways. The project has gotten bigger in terms of service area, vehicle fleet, and testing population. Tesla has also recently received a permit to test in Nevada, unlocking the potential to expand into a brand-new state for the company.
In the note, Dorsheimer also touched on Musk’s recent pay package, revealing that William Blair recently met with Tesla’s Board of Directors, who gave the firm some more color on the situation:
“We recently participated in a meeting with Tesla’s board of directors to discuss the details of Musk’s performance package. The board is confident of its position in the Delaware case and anticipates a verdict by end of year. It does not expect a similar situation to occur under new Texas jurisdiction. Musk has the board’s full support, and we expect he’ll get more than enough shareholder support for this to pass with flying colors.”
Tesla stock is up over 6 percent so far today, trading at $421.50 at the time of publication.
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