Electric-Vehicle Tax-Credit Proposal Slows Tesla, Detroit -- Update
November 03 2017 - 5:21PM
Dow Jones News
By Adrienne Roberts
The clock appears to be ticking on the $7,500 tax credit given
to electric-vehicle buyers, casting a cloud over plans by domestic
auto makers to invest billions into electric-vehicle
development.
The move, signaled Thursday as part of a broader House
Republican tax plan, will likely crimp sales of battery-powered
cars while such vehicles cost far more than conventional cars to
produce. Shares of the two biggest U.S. auto makers in terms of
sales -- General Motors Co. and Ford Motor Co. -- slipped modestly
even as the broader market posted gains.
Shares of Tesla Inc. rallied late Friday after trading down
earlier. Tesla, which sells only electric vehicles, closed at
$306.09 on the Nasdaq, far below the $319.18 price that the car
maker started the week at. Fiat Chrysler Automobiles NV -- an auto
maker far less bullish on electrics, also finished in positive
territory.
Neither GM nor Ford rely heavily on electric cars for overall
sales, but both have signaled plans to substantially increase
battery-powered offerings in coming years. In a note Friday,
Evercore said the change in legislation could hit GM hard because
it would be reliant on the credits to offer its new Chevrolet Bolt
for quite some time at cut-rate lease prices.
"Will GM have to offer a further $7,500 to keep volumes at
today's levels?" the firm wrote. GM sold 17,083 Chevrolet Bolt
electric cars through October.
Nissan Motor Co., another auto maker that has been offering
electric vehicles, sold 10,953 Leaf electric cars this year through
October. It is in the midst of launching an updated version of the
car that can achieve increased range on a single charge.
"We believe price (as well as unappealing product, though the
two are interlinked) is the main inhibitor for electric vehicle
sales over the next three to five years," Evercore said.
In a statement issued Thursday, GM said "tax credits are an
important customer benefit that can help accelerate the acceptance
of electric vehicles," and it intends to work with congressional
leaders to maintain the incentive.
Electric vehicles are already a tough sell to U.S. consumers
because gas prices are low, and the tax credit was seen as a way to
lure customers to buy electric or plug-in hybrid vehicles that are
more expensive than their gasoline-powered counterparts. Electric
cars aren't seen being cost-competitive with conventional cars
until the middle of the next decade, according to analysts.
Tesla, selling three electric models, could also be hit. The
Silicon Valley company was already under severe pressure following
the report of its worst quarterly financial losses earlier this
week.
Tesla has also faced heat because of hiccups related to
production of its new Model 3 sedan, an affordable electric vehicle
aimed at the broader mass market. Tesla made just 250 Model 3 cars
during the third quarter, missing its projection of more than
1,500.
Evercore said that while the absence of the $7,500 tax credit
isn't a "make or break for the majority of Tesla's potential
customers...the absence of the credit is likely to lead to some
people altering their purchase decision."
Tesla had been vying for the No. 1 spot among U.S. auto makers
in terms of market valuation during the summer months, but has
since fallen far behind GM, which is valued at $61.5 billion.
Tesla, currently valued at $49.9 billion, is now virtually even
with Ford.
A Tesla spokesman declined to comment.
Write to Adrienne Roberts at Adrienne.Roberts@wsj.com
(END) Dow Jones Newswires
November 03, 2017 17:06 ET (21:06 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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