What happened
Clean energy stocks jumped yesterday on news of a potential new deal between Senate Majority Leader Chuck Schumer and centrist Senator Joe Manchin on a new bill. A closer look at the bill shows that electric vehicle (EV) leader Tesla (TSLA 5.79%) will benefit if the legislation is approved and enacted. Tesla shares are up again today on this news, trading up 2.4% as of noon ET on Friday.
And what
The surprise deal that came out of Congress yesterday gave a boost to the renewable energy movement with proposed legislation in the Inflation Reduction Act of 2022. According to an estimate by the Congressional Budget Office, there $369 billion in the bill for investments related to energy security and climate change. .
Included in the bill is the continuation of a $7,500 tax credit for new electric vehicle purchases. But most importantly for Tesla, it does not include a prior cap limited to 200,000 vehicle sales for each manufacturer. This makes Tesla buyers eligible for this incentive again.
Now that
Tesla currently has a limited supply, with wait times of up to nearly a year for some models. But with its two new factories going up in Texas and Germany, it should reduce those timelines. The tax credits in the new bill will require the vehicles to be manufactured in North America, and Tesla should have a much better supply when the Texas plant reaches full capacity.
For investors, the inability to meet strong demand is a good problem to have. But it’s even better news if Tesla can close that gap with increased supply and subsequently have a new tailwind to spur more demand. Investors seem to see a win-win situation for Tesla, and shares have rallied in response.
Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Tesla. The Motley Fool has a disclosure policy.