Report: US Senators To Introduce Bill Expanding EV Tax Credit By 400K Vehicles

Tesla Inc TSLA, General Motors Company GM and even Electrameccanica Vehicles Corp SOLO traded higher Wednesday morning after Reuters reported a possible support program from the U.S. Senate.

What Happened

On Wednesday, Michigan Democratic Sens. Debbie Stabenow and Gary Peters will introduce the “Driving America Forward Act” with Republican Sens. Lamar Alexander and Susan Collins, as well as Democratic Rep. Dan Kildee, according to Reuters.

The $11.4-billion bill aims to extend the electric-vehicle tax credit program with $7,000 for an additional 400,000 vehicles per automaker. The aid, added on top of the existing $7,500 credits for each manufacturer’s first 200,000 sales, would reduce the phase-out period to nine months.

The legislation also proposes an extension of the hydrogen fuel cell credit through 2028.

Why It’s Important

GM and Tesla lobbied Congress for over a year to extend the program.

Before the announcement, they had already entered the phase-out stage of the existing $7,500 credit system. GM’s credit dropped to $3,750 this month and will fall to $1,875 in October before expiring April 2020. Tesla’s fell in January, will drop again in July, and will expire by the end of the year. The credit reduction, which effectively raises the consumer price of EVs, threatens vehicle demand.

Automakers expect the latest proposal to buoy sales in the near term. This would bode well for automaker margins, especially considering the hefty investments each committed to meeting emissions standards.

What’s Next

The bill is expected to face White House opposition. In March, officials had proposed axing the $7,500 credit to save the government an estimated $2.5 billion.

The month before, senators in the Environment and Public Works Committee considered legislation not only to kill the credit, but to charge EV drivers a highway user fee for road repairs.

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