With President Biden planning big investments for the EV sector, how exactly will Tesla benefit?
Climate change is a very important issue that governments across the world are trying to address. As well as re-entering the Paris Agreement, President Joe Biden is looking at the electric vehicle (EV) sector to help reach the administration's goal of decarbonizing the U.S. economy by 2050. Tesla (NASDAQ: TSLA) looks well-positioned to benefit.
What EV aspects are part of Biden's plan?
Approximately 2% of new cars now sold in the U.S. are electric. People are waking up to the benefits of going electric, with the auto industry estimating that half of all new car sales by 2030 will be EVs. U.S. President Joe Biden is helping to put the infrastructure in place to accelerate adoption.
He unveiled a $2 trillion spending plan for jobs and infrastructure in early April. Of this money, $174 billion is earmarked for supporting the adoption of EVs. This represents the biggest single item in the plan's transportation segment.
Senate Majority Leader Chuck Schumer is leading the push to create 500,000 EV chargers across the country by 2030 as part of this new plan. Some other uses of the funds include providing incentives for people buying EVs, improving EV supply chains, and making alterations to existing factories to help with their transition to producing EVs.
What does this plan mean for Tesla?
Tesla is the number one EV manufacturer in the U.S., accounting for about 79.4% of the total EV sales nationwide in 2020. Therefore, it is well-positioned to take advantage of Biden's infrastructure plan as it is much more established than its competitors.
Tax incentives and rebates will mean that EVs will become a lot more affordable to the average American, boosting Tesla's sales. Currently, there are no details about the size of these incentives, but some analysts believe that a $10,000 federal tax credit could be on the table. Significantly expanding the countrywide network of charging stations will also quell concerns people have about charging capabilities.
Despite having a bigger market cap than any other automaker in the world, Tesla still only sold about half a million cars last year. However, the growth potential of the company is what attracts investors. Biden's plan puts in place the infrastructure to allow for an acceleration in the transition towards EVs. The administration wants all new cars sold in 2035 to be electric.
The investment into domestic supply chains is aimed at helping U.S. EV manufacturers to compete on a global level. U.S.-based Tesla is currently eyeing up key markets like China and Europe in an attempt to capture as much market share as possible.
From an investor's point of view, Tesla holds a huge amount of potential. This is reflected by extremely bullish investor sentiment leading to Tesla stock increasing 695% in 2020. The U.S. government's investment in the EV space is only going to bring good things to Tesla. If the EV sector manages to stay on track for the lofty sales targets in the coming years, Tesla looks like it will be a massive benefactor.
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