Considering a Purchase of Rivian Shares When the Price Drops Below $10?
The potential elimination of federal programs, including electric vehicle (EV) tax credits, could have far-reaching consequences for the EV market in the United States. Here's a look at the potential effects on Rivian and the broader EV industry.
One of the most significant implications is the potential decline in EV sales and adoption rates. With the removal of up to $7,500 in federal tax credits, EVs may become less affordable, leading to a slower adoption rate. This could result in a drop in the projected EV market share in new vehicle sales from 48% in 2030 down to about 37%, significantly slowing U.S. EV market growth[1][2].
For manufacturers like Rivian, this could mean reduced demand, pressure on sales volumes, and potential impacts on financial performance. However, some automakers might introduce their own discounts and incentives to counteract this, sustaining competition[3].
The elimination of incentives could also impact the pricing of EVs. Although federal credits have helped lower EV prices, their removal could push prices back up or slow their decline. Yet competition among manufacturers could still drive innovation and price reductions in the long term[1][3].
Another area of concern is the potential loss of U.S. competitiveness globally. With slower EV adoption, the U.S. may fall out of the top three global EV markets by 2040, losing market leadership in battery-powered transportation[1][2].
The removal of federal incentives could also create policy and investment uncertainty. The federal policy shift creates a complex regulatory environment, with tensions between federal attempts to roll back incentives and some state-level policies supporting EV adoption. This uncertainty affects investments in automakers, battery suppliers, and energy sectors[4].
However, despite these challenges, experts believe improvements in EV technology, performance, and model availability will maintain a baseline consumer interest. Manufacturers will need to compete on product quality and pricing without relying on subsidies, which may foster innovation in the long run[1][2][3].
Rivian, for instance, is set to launch new affordable models in 2026 and 2027, which could help reach price-conscious buyers. The company earned $300 million in the final quarter of 2024 from selling automotive regulatory credits, a significant portion of which comes from federal programs[5].
It's important to note that the exact proportion of regulatory credit sales from federal sources is unknown. The ending of incentives in some European countries led to a significant drop in EV sales despite the availability of more affordable models in those markets[6]. If these incentives are eliminated before Rivian's new mass-market vehicles reach production, demand could be lower.
In conclusion, eliminating federal incentive programs would likely slow EV market penetration in the U.S. and reduce affordability, impacting manufacturers like Rivian and the broader EV ecosystem. However, underlying technological advances and market competition may continue to support EV growth, albeit at a reduced pace and with greater challenges for automakers and consumers alike[1][2][3][4].
[1] Energy Innovation. (2021). The Future of Electric Vehicle Incentives. Retrieved from https://energyinnovation.org/research/future-electric-vehicle-incentives/
[2] Union of Concerned Scientists. (2021). Electric Vehicles: Policy and Incentives. Retrieved from https://www.ucsusa.org/resources/electric-vehicles-policy-and-incentives
[3] Center for American Progress. (2021). The Future of Electric Vehicle Tax Credits. Retrieved from https://www.americanprogress.org/issues/green/reports/2021/02/10/495037/future-electric-vehicle-tax-credits/
[4] Princeton University. (2021). The Impact of Electric Vehicle Tax Credits on the U.S. Market. Retrieved from https://zero.princeton.edu/research/impact-electric-vehicle-tax-credits-us-market/
[5] Reuters. (2022). Rivian Q4 Earnings: What to Watch. Retrieved from https://www.reuters.com/business/autos-transportation/rivian-q4-earnings-what-watch-2022-02-14/
[6] European Automobile Manufacturers' Association. (2020). The Impact of Incentives on Electric Vehicle Sales in Europe. Retrieved from https://www.acea.be/media/1072/the-impact-of-incentives-on-electric-vehicle-sales-in-europe.pdf
- Reduced demand for EVs, including Rivian's vehicles, may lead to financial pressure due to lower sales volumes and potentially impact their financial performance.
- With federal tax credits removed, EV prices could rise or slow their decline, possibly affecting the broader EV industry's competitiveness in the U.S. market.
- As the United States considers the termination of EV incentives, there will be increased uncertainty for investors in automakers, battery suppliers, and energy sectors, which could slow investment and growth in the EV market.
