President Joe Biden’s $2 trillion plan to overhaul U.S. infrastructure, the biggest such initiative in more than half a century, could trigger a “green tidal wave,” in the words of one analyst, speeding the transportation industry’s shift to electricity from carbon-based fuels and generating big benefits for companies ranging from Elon Musk’s Tesla to General Motors and electric vehicle startups such as Fisker and Lucid Motors.
The White House on Wednesday said Biden’s plan to “create good jobs electrifying vehicles” includes funding to spur production of vehicles, batteries, parts and materials at domestic factories and new tax incentives and “point of sale” rebates for consumers to make electric cars and trucks more affordable. That’s particularly meaningful for Tesla and GM, which have exhausted previously approved federal tax incentives for purchases of their EVs.
Skilled workers will be “building a nationwide network of 500,000 charging stations. Creating good-paying jobs by leading the world in the manufacturing and export of clean electric cars and trucks,” Biden said in a speech in Pittsburgh. “We’re going to provide tax incentives and point of sale rebates to help all American families afford clean vehicles of the future.”
Though passage of the massive spending package is far from a sure thing, Tesla shares rose 5% in Nasdaq trading, while General Motors shares declined 1.8%. Fisker, which begins delivery of electric SUVs in 2022, gained 3% and QuantumScape, a maker of solid-state batteries backed by Volkswagen, rose 1.5%.
“For the EV sector, the Street has been awaiting this day since Biden was elected into 1600 Pennsylvania Avenue back in November as the combination of a Biden Administration and a Blue Senate sets the stage for a green tidal wave in the U.S. to kick off with electric vehicles the centerpiece,” Wedbush equity analyst Dan Ives said in a report today. In the near term, new rebates available at the time of purchase can “catalyze consumers to head down the EV path.”
Federal support for electrified transportation, including commercial and government fleets and passenger vehicles, coincides with a broad-based transition across the auto industry to wean consumers off gasoline and diesel and into battery-powered cars and trucks amid rising worries over climate-damaging carbon exhaust. Global automakers including GM, Volkswagen and Hyundai are trumpeting plans for dozens of zero-emission models–including hydrogen fuel-cell electric vehicles–while EV startups such as Fisker, Lucid, Rivian and Arrival and next-generation battery makers including QuantumScape and Sila Nanotechnologies cumulatively have raised billions of dollars and gone public in many cases to get into production as quickly as possible.
Despite all that activity, electric vehicles accounted for only about 2% of new auto sales in the U.S. in 2020, less than half the market share the segment enjoys in China. Even Tesla, the world’s most valuable automaker with a market cap of more than $630 billion, sold slightly fewer than 500,000 vehicles globally in 2020, a fraction of the 10 million or so units that Toyota and Volkswagen rack up in a typical year. Still, that leaves a big opportunity for growth.
“The United States is in the midst of a fundamental transformation of our transportation sector, with consumers, businesses, fleets and automakers embracing the transition to electric vehicles,” Pasquale Romano, president and CEO of ChargePoint, which operates the largest EV charging network in North America, said Wednesday. “This transition will create millions of American jobs, reduce greenhouse gas emissions, create economic benefits and ensure American transportation leadership for years to come.”
The U.S. market for EV sales “is only one-third the size of the Chinese EV market. The president believes that must change,” the White House said. “He is proposing a $174 billion investment to win the EV market. His plan will enable automakers to spur domestic supply chains from raw materials to parts, retool factories to compete globally, and support American workers to make batteries and EVs.”
“The federal government owns an enormous fleet of vehicles which are going to be transitioned to clean electric vehicles and hydrogen vehicles, right here in the United States of America–with American workers and American products,” Biden said on Wednesday.
Beyond the market and financial implications for vehicle and battery manufacturers, groups that favor more aggressive U.S. action to curb carbon emissions are backing Biden’s plans.