Senate passes Inflation Reduction Act: why does it matter for EV investors?

EV stocks ended in the green on Monday after the U.S. Senate passed the Inflation Reduction Act of 2022. “House” will now vote on it this Friday.

How does the bill help the EV space?

The proposed legislation offers a $7,500 tax credit on new EVs through 2032, so long that they don’t excessively use materials/components sourced from outside of the U.S. and its trade partners.

Evidently, the idea is to increasingly make the United States self-sufficient in producing electric vehicles. On CNBC’s “Squawk Box”, Neuberger Berman’s Jonathan Bailey said:

Unlike before, the Inflation Reduction Act now covers fuel cell electric vehicles as well.

Inflation Reduction Act will boost EV adoption

Interestingly, the bill disqualifies electric cars with an MSRP of more than $55,000 (over $80,000 for electric vans, pickup and SUVs) to incentivize “affordability”. Bailey added:

Naturally, the EV stocks stand to benefit from that increase in adoption.

The legislation also disqualifies single filers with adjusted gross income of more than $150,000 and enables those eligible to use the tax credit as part of the down payment to reduce the upfront cost, which further speaks to its focus on affordability.