Electric-Vehicle Tax Credit Proposal Slows Tesla, Detroit
November 03 2017 - 2:36PM
Dow Jones News
By Adrienne Roberts
Shares of domestic auto makers largely suffered after news the
House Republican tax plan would kill the electric-vehicle tax
credit, a trend that further hits an already beleaguered Tesla
Inc.
Eliminating the $7,500 federal EV incentive would likely crimp
sales of battery-powered cars at a time when such vehicles cost far
more than conventional cars to produce. Tesla, which sells only
electric vehicles, fell slightly to $298.30 in midday trading on
the Nasdaq.
General Motors Co. and Ford Motor Co. also posted modest
declines, with the pair trading at $42.38 and $12.37 respectively.
Neither company relies heavily on electric cars for overall sales,
but both have signaled plans to substantially increase
battery-powered offerings in coming years.
Tesla, GM and Ford declined even as the broader stock market
gained steam. Fiat Chrysler Automobiles NV -- an auto maker far
less bullish on electrics, gained steam in midday trading.
Negative investor reaction hits Tesla particularly hard, with
the stock's current lows nearing price levels not seen since May.
The company was already under severe pressure following the report
of its worst quarterly financial losses earlier this week. Shares
are off 8% from Wednesday's open.
Tesla has also faced heat due to 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.
In a research note, 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."
Evercore noted Tesla isn't the only auto maker that would be
affected by the elimination of the tax credit, and the change in
legislation could be more harmful to GM, Nissan Motor Co. and other
auto makers with mass-market electric vehicles that have launched
or have committed to produce.
"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. Tesla didn't immediately
comment.
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.
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.
Write to Adrienne Roberts at Adrienne.Roberts@wsj.com
(END) Dow Jones Newswires
November 03, 2017 14:21 ET (18:21 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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