Tesla Stock Gets a Boost Because Electric Car Tax Credits Could Be Extended - Barron's

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Shares of Tesla rose Wednesday morning as a bipartisan group of U.S. lawmakers introduced legislation that could extend tax credits that make electric vehicles more attractive to car buyers—but which could face stiff opposition.

The proposed legislation would reportedly expand a tax credit, currently applicable to 200,000 vehicles per manufacturer, by another 400,000, according to Reuters.

That wouldn’t just help Tesla (TSLA), which saw its stock up less than 1% Wednesday morning, narrowing earlier gains. General Motors (GM) was the second company to reach the sales threshold that starts the phaseout of credits available to consumers.

GM stock was recently around flat, though it also jumped earlier, while the broader S&P 500 was about the same.

“This bill will help our manufacturers innovate and develop new products, which will create jobs and give consumers more choice,” said U.S. Sen. Debbie Stabenow (D., Mich.), who is backing the bill along with Sen. Lamar Alexander (R., Tenn.), among others, in a Tuesday statement.

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The Driving America Forward Act would, among other things, create a $7,000 credit for 400,000 vehicles beyond the $7,500 credit available for the first 200,00, shortening the phase out schedule, according to the Reuters report. (Details of how the current schedule affects manufacturers are available from the Environmental Protection Agency.)

It’s unclear that such a bill would pass. There is outspoken opposition to the credits in Congress, and the White House has signaled a willingness to let them expire.

Tesla earlier this year announced price cuts meant to offset the effects of the expiring credits. That announcement came before its continued adjustment of prices around the introduction of the $35,000 Model 3 sedan, as well as the bumpy rollout of its plans to move to all-digital sales.

An extension of the credit to another 400,00 vehicles, even at somewhat reduced levels, would likely be seen as a boost to U.S. demand.

Meanwhile, Tesla has some new analyst coverage: Nomura Instinet’s Christopher Eberle, who late Tuesday started coverage of the company with a Neutral rating and a $300 price target—below FactSet’s average near $321—and a note that arguably captures much of the dual-edged debate about the outlook for the stock.

“Tesla is a true disrupter of the automotive industry, in our view. It forces legacy combustion engine behemoths to scramble to develop competing products without cannibalizing their cash flow machines,” Eberle wrote. “We applaud the company for blazing these trails and leading the way in creating a sustainable electric vehicle revolution and automating transportation. That said, we are cautious near term, as we navigate the breakneck pace of Tesla’s global expansion.”

Tesla shares are trading at $274.83, up 0.9%, on Wednesday morning.

Email David Marino-Nachison at david.marino-nachison@barrons.com. Follow him at @marinonachison and follow Barron’s Next at @barronsnext.

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