Vehicles made by American electric vehicle (EV) startups Rivian (RIVN), Fisker (FSR), Nikola (NKLA), and Lucid (LCID) will not be eligible for the $7,500 tax credit as per the new rules set by the U.S. administration. Also, no EV of a foreign brand currently qualifies for a tax credit. The new rules, which become effective April 18, are more stringent and have reduced the number of EVs that qualify for a full federal EV tax credit of $7,500 under the Inflation Reduction Act.
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To qualify for the tax credits, EV makers will have to ensure that at least 50% of the value of their battery components is made in North America. Moreover, 40% of the value of critical minerals must be sourced from the U.S. or its trade partners. These rules aim to reduce the country’s dependence on China and to encourage domestic production of components. President Joe Biden wants EVs to account for 50% of new vehicle sales by 2030.
As per the latest list released by the U.S. Treasury through the U.S. Department of Energy, all General Motors (GM) EVs qualify for tax credits. Tesla’s (TSLA) Model 3 Standard Range Rear Wheel Drive will be eligible for a partial tax credit of $3,750, while Model 3 Performance and Model Y will get the full $7,500 credit.
Ford’s (F) E-Transit, Mustang Mach-E, Ford Escape Plug-in Hybrid, and Corsair Plug-in Hybrid will be eligible for partial tax credits, while the F-150 Lightening and Aviator Plug-In Hybrid feature in the full tax credit list.
The news of Rivian EVs not being eligible for tax credits didn’t seem to impact investors much, with shares rising 2.6% on Monday. The company delivered 7,946 vehicles in Q1, surpassing analysts’ estimate of 7,752 units. However, Piper Sandler analyst Alexander Potter downgraded the stock from a Hold to Buy last Friday, citing funding concerns.
Is Rivian Stock a Good Buy?
Wall Street’s Moderate Buy consensus rating for Rivian is based on 12 Buys, five Holds, and one Sell. The average Rivian Stock price target of $27.50 suggests over 100% upside. Shares have plunged 25.5% since the start of the year.
