Shares of electric car company Tesla (NASDAQ: TSLA) traded higher on Wednesday, rising 1.4%. The stock's gains follow a report from Reuters that a two-tier group of US lawmakers introduced the law this week to improve the tax credit for electric vehicles. Current credit begins to phase out after a manufacturer sells 200,000 qualifying vehicles. However, a new credit will significantly expand this limit.
Of course, since all vehicles manufactured by Tesla are completely electric, the bill can be both a significant and important demand driver for the automaker.
Meet the Driving America Forward Act
The new bill, called the Driving America Forward Act, proposes to give automakers 400,000 additional qualifying electric vehicle sales on top of the first 200,000 already qualifying for a $ 7,500 tax credit that goes to buyers of the vehicles. For the additional 400,000 vehicles, the bill will allow buyers to earn $ 7,000 tax.
However, the new bill will have a shorter phasing-out period, selling over a nine-month period after a manufacturer sells an additional 400,000 cars on top of the 200,000 eligible for current tax credit. It compares with today's credit 15-month phasing out period after a manufacturer sells its 200,000 electric vehicle.
The new bill is "sponsored by democratic Sens. Debbie Stabenow and Gary Peters, Republican Sens. Lamar Alexander and Susan Collins, and Democratic rep. Dan Kildee," Reuters says.
The bill will cost around $ 11.4 billion
A timely catalyst
If this bill passes, it can give a timely boost to claim Tesla vehicles.
The company's last deliveries did not fall into Expectations, as demand for car manufacturer's pricier model S and X seems to have taken a hit in the midst of the phasing out of today's tax credit for Tesla, the management predicted in the fourth quarterly update that it was likely to drive US demand for model S and model X for As of January 1, 2018, as a result of the credit reduction on January 1, the tax loan for buyers of Tesla cars was cut in half to $ 3,750, as bilp The Rodentent recently exceeded the 200,000 cumulative selling price of electric vehicles. However, deliveries of the two vehicles were much lower than Tesla had guided, suggesting that demand was significantly lower.
An extended tax on electric vehicles could also help stimulate the demand for Tesla's lower price, higher volume Model 3, just as the company is ramping up the car's production.
The existing credit is scheduled to fall to $ 1,875 in July and be eliminated completely by the end of the year for Tesla buyers.
The proposed new electric vehicle tax credit will be linked to tax laws for assessment over the next couple of months, hope supporters. Of course, the bill could see strong opposition. In fact, the Trump management's budget proposal for 2020 fully recommended the end of electric vehicle tax and rescued the US government to estimate $ 2.5 billion over a decade.