In this article, we will discuss 10 EV stocks that will benefit from the Climate Change Bill 2022.
On August 7, the U.S. Senate approved a comprehensive $430 billion bill to combat climate change, decrease drug prices, and increase a few corporate taxes. The bill, also known as the Inflation Reduction Act, would provide electric car buyers tax credit. Presently, taxpayers were given a tax credit of $7,500 on buying an EV, and there was a limit of giving tax credits to 200,000 customers for each EV manufacturer. Under the new bill, this limit has been eliminated, and the tax credit has been extended till 2032. Furthermore, the government also announced a tax credit of $4,000 on used EVs, which are priced at $25,000 or less. To become eligible for the tax credit for a used vehicle, the gross annual income for a family should be $150,000 or lower.
The bill requires that the EV is manufactured in North America, and the critical raw materials and other components should be either sourced from the US or a nation that has a free-trade agreement with the US. This would mean that some EVs that are sold in the US but do not fulfill these requirements would be ineligible for the tax credit when the law comes into effect from January 2023. The new tax credit would be applicable on trucks, sports utility vehicles (SUVs), and vans under the price of $80,000 and cars up to $55,000. Furthermore, the tax credit on new EVs would only be granted to families that have a gross annual income of $300,000 or under. The US government also gave $3 billion to the US Postal Service to acquire EVs and equipment related to battery charging.
The US government is promoting EVs to combat climate and environmental deterioration. According to the Environment Protection Agency (EPA), conventionally powered fuel engines are responsible for contributing 27% of the greenhouse gas emissions in the US. In comparison, battery-powered cars only produce a fraction of greenhouse gases like carbon dioxide. However, EVs have not become as economical as fuel-powered vehicles because critical raw materials like lithium have observed a significant increase in prices due to high demand and limited supply. According to Irvine, California-based automobile research and valuation firm Kelly Blue Book, the average price of EVs has risen by 14% YoY to $66,000, which is $20,000 higher than the average price for all new cars. The demand for EVs is strong, and companies are either not taking fresh orders due to the significant backlog of orders or giving a delivery date from January 2023 to April 2023. Some of the most popular players in the EV industry include Tesla, Inc. (NASDAQ:TSLA), General Motors Company (NYSE:GM), and Rivian Automotive, Inc. (NASDAQ:RIVN).
Our Methodology
Given the favorable outlook for the EV industry following the Climate Change Bill, we will go through the 10 EV stocks that will benefit from the bill. We will look into how these companies will capitalize on the developments discussed above. Insider Monkey’s database of 912 hedge funds was used to derive the hedge fund sentiment concerning each stock as of Q1 2022.
10 EV Stocks that Will Benefit from Climate Change Bill 2022
10. Toyota Motor Corporation (NYSE:TM)
Number of Hedge Fund Holders: 9
Toyota Motor Corporation (NYSE:TM) is a Japanese automobile manufacturer. Toyota Motor Corporation (NYSE:TM) would benefit from the removal of the limit over granting tax credits as it had recently used up its quota of giving tax credits to 200,000 customers. However, Toyota Motor Corporation (NYSE:TM) would need to modify the production of bZ4x and Mirai variants to make them eligible for the tax credit. Under the requirements of the bill, both these vehicles will not be eligible because they are not manufactured in North America.
Hence, Toyota Motor Corporation (NYSE:TM) is preparing to boost its EV production in the US. The company reached a new supply agreement to procure 4,000 tonnes of lithium carbonate annually from the Rhyolite Ridge mining project owned and operated by Ioneer Limited. The lithium will be enough to produce around 150,000 EVs annually. Toyota Motor Corporation (NYSE:TM) anticipates achieving annual EV sales of 3.5 million by 2030. The company sold 1.6 million EVs globally in 2021.
Baron Funds shared its thoughts on Toyota Motor Corporation (NYSE:TM) in its Q1 2022 investor letter. Here’s what the firm said:
“Toyota’s (NYSE:TM) “kaizen” manufacturing philosophy is based on improving manufacturing by using “just in time” processes to eliminate waste and reduce inventory carrying costs. Clearly the company does not contemplates disruptive change that will dramatically lower costs and improve quality.”
9. Fisker Inc. (NYSE:FSR)
Number of Hedge Fund Holders: 16
Fisker Inc. (NYSE:FSR) is a Manhattan Beach, California-based EV company.
Fisker Inc. (NYSE:FSR) intends to use the “Transition Rule” of the Climate Change Bill and get reservations for the company’s all-electric SUV Fisker Ocean by entering into a binding contract with the customers. Instead of receiving the full amount upfront, Fisker Inc. (NYSE:FSR) is converting $100 and $250 deposits into non-refundable orders in their systems. The Fisker Ocean is priced at $37,499, excluding tax credit. After incorporating the impact of the credit, the price of $30,000 becomes very attractive. The pricing sets Fisker Inc. (NYSE:FSR) apart from its competitors.
However, it should be noted that Fisker Ocean would not be eligible for the complete incentives proposed by the bill because its manufacturing will start in November 2022 through a third-party Magna plant in Graz, Austria. The US does not have a free trade agreement with Austria.
Citadel Investment Group increased its stake in Fisker Inc. (NYSE:FSR) by 45% during Q1 2022.
8. ChargePoint Holdings, Inc. (NYSE:CHPT)
Number of Hedge Fund Holders: 16
ChargePoint Holdings, Inc. (NYSE:CHPT) is a Campbell, California-based developer of EV charging stations across North America and Europe.
ChargePoint Holdings, Inc. (NYSE:CHPT) will benefit from the higher sales of EVs and a higher level of support from the government following the imposition of the bill. Charging companies have been finding it challenging to keep up with the demand for new charging stations as the adoption of EVs is growing rapidly.
ChargePoint Holdings, Inc. (NYSE:CHPT) has entered into a partnership with Starbucks Corporation (NASDAQ:SBUX) and Volvo Cars to provide its charging facilities at Starbucks stores along the 1,350-mile Denver to Seattle route. Four charging stations have been installed at the first Starbucks location in Provo, Utah, and additional locations will be picked for the installation of charging stations moving forward. ChargePoint Holdings, Inc. (NYSE:CHPT) also received a boost earlier this year when the US government announced in February that it would give $5 billion to states to fund the construction of EV chargers.
Overall, 16 funds held a stake worth $34.7 million in ChargePoint Holdings, Inc. (NYSE:CHPT) as of Q1 2022.
7. Lucid Group, Inc. (NASDAQ:LCID)
Number of Hedge Fund Holders: 16
Lucid Group, Inc. (NASDAQ:LCID) is a Newark, California-based luxury EV startup that is backed by Saudi Arabia’s Public Investment Fund (PIF).
The company’s Lucid Air will be ineligible for the tax credit as the starting price of the EV car is $107,400, significantly higher than the price limit set to qualify for the credit. However, Lucid Group, Inc. (NASDAQ:LCID) has the benefit of having its production facility located in Case Grande, Arizona, which makes the company’s offerings eligible for the tax credit. Lucid Group, Inc. (NASDAQ:LCID) is expected to develop a variant that falls in the required price range.
Lucid Group, Inc. (NASDAQ:LCID) is already working on expanding the production capability at its Case Grande facility under Phase-3 to 400,000 units annually. This will be a big jump as the company only delivered 1,379 vehicles during the first half of 2022 and intends to achieve an output of 6,000 to 7,000 units by the end of 2022.
The number of hedge funds having a stake in Lucid Group, Inc. (NASDAQ:LCID) increased from 14 in Q4 2021 to 16 in the second quarter of 2022.
6. Canoo Inc. (NASDAQ:GOEV)
Number of Hedge Fund Holders: 19
Canoo Inc. (NASDAQ:GOEV) is a Torrance, California-based EV startup in the pre-revenue stage.
During the Q2 2022 results, Canoo Inc. (NASDAQ:GOEV) revealed that it finished the second quarter of the year with over $1 billion in the company’s sales pipeline. This was primarily due to the 4,500 units order placed by Walmart, Inc. (NYSE:WMT), which can potentially rise to 14,500 units. Canoo Inc. (NASDAQ:GOEV) has also reached an agreement with the US Army to provide its EV for analysis and demonstration. This could also lead to a possible bulk order in the near future.
Canoo Inc. (NASDAQ:GOEV) is expanding its operations and intends to launch an Electric Pickup Truck in 2023 that is expected to be priced around $35,000 to $50,000. The truck can be pre-ordered through the company website for a refundable fee of $100. As Canoo Inc. (NASDAQ:GOEV) expands its production, the company will become a beneficiary of the Climate Change Bill as most of its products will be within the price range required to be eligible for the tax credit.
At the end of Q1 2022, 19 funds reported owning a stake in Canoo Inc. (NASDAQ:GOEV).
Besides Canoo Inc. (NASDAQ:GOEV), popular companies like Tesla, Inc. (NASDAQ:TSLA), General Motors Company (NYSE:GM), and Rivian Automotive, Inc. (NASDAQ:RIVN) are also expected to benefit from Climate Change Bill 2022.
5. Rivian Automotive, Inc. (NASDAQ:RIVN)
Number of Hedge Fund Holders: 29
Rivian Automotive, Inc. (NASDAQ:RIVN) is an Irvine, California-based EV company.
Experts expect certain variants of Rivian R1S SUV and Rivian R1T pickup trucks to be eligible for the extended tax credit proposed by the Climate Change Bill. Although only a few variants meet the eligibility criteria at the moment, Rivian Automotive, Inc. (NASDAQ:RIVN) is working on introducing lower-priced models before 2025 under the R2 range.
Presently, Rivian Automotive, Inc. (NASDAQ:RIVN) has a manufacturing facility in Normal, Illinois. The company intends to open a second manufacturing facility near Atlanta, Georgia by 2025. The new facility will be focused on producing the more affordable R2 range. Like Fisker, Rivian Automotive, Inc. (NASDAQ:RIVN) has shown the willingness to enter into a buyer’s agreement to circumvent the impact of the Climate Bill on higher-priced models. Rivian Automotive, Inc. (NASDAQ:RIVN) is also expected to benefit from the CHIPS bill that will provide incentives worth billions of dollars to semiconductor makers in the US. Shortage of semiconductor chips has caused significant delays for EV companies like Rivian Automotive, Inc. (NASDAQ:RIVN).
Here’s what Baron Funds said about Rivian Automotive, Inc. (NASDAQ:RIVN) in its Q1 2022 investor letter:
“Rivian Automotive, Inc. designs, manufactures, and sells consumer and commercial electric vehicles. Shares of Rivian continued its volatile trading following the stock’s IPO in late 2021, declining 52% in the first quarter as investors rotated out of fast-growing long-duration stocks and as industrywide supply-chain issues delayed Rivian’s production ramp. In addition, even while other automotive companies raised prices due to inflationary pressures, Rivian launched a price increase campaign that was not well communicated and, as a result, was met with dissatisfaction by existing reservation holders. While this was an unforced error, the company quickly corrected course, reversing its decision to raise prices for existing reservations, while maintaining the increase on new buyers (which has not caused a material impact to demand). We retain conviction in the shares given management’s vision, Rivian’s product positioning, the company’s relationship with Amazon.com, and the company’s strong balance sheet, which will help it overcome the current challenges while taking advantage of the long-term opportunity as the market transitions to electric vehicles.”
4. Stellantis N.V. (NYSE:STLA)
Number of Hedge Fund Holders: 29
Stellantis N.V. (NYSE:STLA) is a Dutch automobile company with 14 brands in its portfolio.
By 2030, Stellantis N.V. (NYSE:STLA) intends to reach 100% of its revenue in Europe and 50% of its revenue in the US through EV sales. Furthermore, the company intends to introduce 75 EV models by the start of 2023. Stellantis N.V. (NYSE:STLA) aims to achieve yearly sales of five million units by the end of this decade.
The Climate Bill includes a $2 billion package to aid automakers in converting their existing facilities to produce EVs. Furthermore, the automakers can get a loan of as much as $20 billion to construct new EV manufacturing facilities in the US. Stellantis N.V. (NYSE:STLA) can be expected to benefit from the conversion portion of the bill as the company is heading into a contract renewing year with the United Auto Workers (UAW) union.
Of the 912 hedge funds in Insider Monkey’s database, 29 funds held a stake in Stellantis N.V. (NYSE:STLA) as of Q1 2022.
3. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 46
Ford Motor Company (NYSE:F) is a Dearborn, Michigan-based legacy auto manufacturer that has gained significant market share by converting its legacy models into an EV powerhouse. The company became the best-selling EV brand in the US in July 2022.
The American muscle car, Ford Mustang, has been converted into Ford Mustang Mach E. Following that, Ford Motor Company (NYSE:F) took a step further and introduced the Ford F-150 Lightning. These models are expected to qualify for the tax credit, given their manufacturing status and price. Ford Motor Company (NYSE:F) reached the highest EV market share of 10.9% in the US in July 2022.
Ford Motor Company (NYSE:F) was discussed in the Q1 2022 investor letter of Baron Funds. Here’s what the firm said about the company:
“Ford (NYSE:F) is another example of typical industrial manufacturing business executive mindsets. The April 18, 2022, Bloomberg Businessweek cover story features Ford CEO Jim Farley behind the wheel of an electrified Ford F-150 Lightning. The article is titled, “Hey Elon, THIS is a truck.” I thought the article was terrific. One idea especially stood out to me. Since the F-150 is such a popular vehicle, it “argued for a gradual approach to electrification. Essentially the company retrofitted an existing F-150 with an electric powertrain rather than develop an entirely new truck.” No all-in financial and operation bet by this company on electrification.”
2. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 76
General Motors Company (NYSE:GM) is a Detroit, Michigan-based automobile manufacturer. The company has the distinction of being the biggest automaker in the US.
General Motors Company (NYSE:GM) is on an ambitious target of dethroning Tesla, Inc. (NASDAQ:TSLA) to become the biggest seller of EVs by reaching an annual EV sales target of one million units. The company is pursuing this goal by investing $35 billion in EV product development between 2020 and 2025.
General Motors Company (NYSE:GM) sold 25,000 EVs in 2021 as opposed to an estimated 325,000 units sold by Tesla, Inc. (NASDAQ:TSLA). Meanwhile, during the first half of this year, the company sold 7,674 EVs due to the chip shortage. General Motors Company (NYSE:GM) has numerous affordable EV brands under its holding that will be eligible for the tax credit under the new bill.
Here’s what was said about General Motors Company (NYSE:GM) in the Q1 2022 investor letter of Diamond Hill Capital:
“General Motors—and the auto industry in general—continues to face headwinds related to supply chain disruptions and raw material cost inflation. In addition, uncertainty surrounding global energy markets due to inflation and the conflict in Ukraine has created a greater economic burden on consumers, which tends to slow automotive sales.”
General Motors Company (NYSE:GM) was held by 76 hedge funds at the end of Q1 2022.
1. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 80
Following the Climate Change Bill, Tesla, Inc. (NASDAQ:TSLA) will again be in a position to offer its buyers tax credit as the US government has removed the limit of granting credit to 200,000 customers. The company had utilized its assigned quota as per the previous law. Certain variants of Tesla Cybertruck, Model 3 are expected to be eligible for the tax credit. However, Tesla Model Y would only qualify if it is classified as an SUV and not a station wagon and if the price of the vehicle is kept under the $80,000 level.
Tesla, Inc. (NASDAQ:TSLA) is facing a significant backlog of orders and committing to delivery by 2023. Experts consider Tesla, Inc. (NASDAQ:TSLA) closest in terms of fulfilling the requirements of the Climate Change Bill related to the procurement of raw materials either from the US or its trading allies.
Fiduciary Management shared its insights on Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter. Here’s what the firm said:
“Remarkably, the Nasdaq-100 and Russell 2000 indices are up 6.25% and 3.90% through 3/31/22, respectively, since the war started. Tesla, Inc. (NASDAQ:TSLA) went up 57% from its low on February 24 ($700) to the close on March 29th ($1099), which equates to an advance of $413 billion. To put that in perspective, the 24-trading day gain in Tesla was greater than the entire market value of Walmart, Inc.! Tesla trades for 120 times estimated 2022 GAAP2 earnings, compared to Walmart’s (NYSE:WMT) 21.8 multiple (1/2023 fiscal year).”
You can also take a peek at 10 Stocks To Buy According to William Von Mueffling’s Cantillon Capital Management and 10 Medical Marijuana Stocks To Buy Now.
Follow Insider Monkey on Twitter
Suggested Articles:
- Top 8 Stock Picks of Jeff Ubben’s Inclusive Capital
- 10 Best Stocks For Inflation According to Redditors
- 10 Healthcare Stocks to Buy Now According to Billionaire Larry Robbins
Disclose. None. 10 EV Stocks that Will Benefit from Climate Change Bill 2022 is originally published on Insider Monkey.
