3 Stocks in Focus on Biden's $15.5B Offer to Fastrack EV Shift

As we know, U.S. President Joe Biden has made addressing climate change a cornerstone of his administration’s agenda and believes in the pivotal role of green vehicles in combating the climate crisis. In line with his commitment to bring environmentally friendly vehicles into the mainstream, Biden unveiled a significant financial commitment of $15.5 billion last Thursday.

This incentive — aimed at retooling existing factories for electric vehicles (EVs) and battery production — is not just a nod to environmental concerns but also a strategic play to boost domestic manufacturing and job creation. In the wake of this funding announcement, you can power up your portfolio with stocks like General Motors GM, Ford F and Solid Power SLDP.

Biden’s $15.5B EV Incentive Breakdown

The $15.5 billion package is a mix of grants and loans, with a significant portion earmarked for the retooling of existing factories. Specifically, $2 billion in grants and up to $10 billion in loans will be available to support the conversion of automotive manufacturing projects, encompassing light-, medium-, and heavy-duty EVs. An additional $3.5 billion has been set aside to bolster domestic battery manufacturing for EVs and the national grid.

This initiative is a lifeline for legacy automakers, many of whom have been grappling with the challenges of transitioning to EVs profitably. By focusing on the retooling of existing facilities, the administration is ensuring that these traditional players are not left behind in the EV revolution. Moreover, EV startups that have repurposed facilities previously dedicated to internal combustion engine vehicles could also stand to benefit.

The investment into domestic EV and battery manufacturing aligns seamlessly with the Biden administration’s commitment to bolstering the American manufacturing sector. The backdrop to this is the recent trend of onshoring battery manufacturing. The COVID-19 pandemic exposed vulnerabilities in global supply chains, particularly for critical battery materials predominantly sourced from China. The Inflation Reduction Act of August 2022 further catalyzed domestic manufacturing by offering a slew of incentives. All in all, the road ahead for the U.S. EV industry looks electrifying.

The Booming EV Prospects

While overall U.S. vehicle sales were down year over year in 2022, EV sales managed to maintain momentum. More than 807,000 EVs were sold last year in the United States, accounting for 5.8% of total vehicle sales, up from 3.2% in 2021. Per Statista, EV sales in the United States are expected to reach 2.46 million units by 2028. Revenues are expected to witness a CAGR of around 18.17% between 2023 and 2028, resulting in a projected market volume of $161.6 billion by 2028.

Legacy automakers are revving up their e-mobility game and are setting deadlines to phase out ICE models. Pure-play EV makers are also focused on expanding their vehicle lineup. The pursuit of EV dominance is only expected to intensify in the coming years as major automakers, startups and pure EV companies all work toward the development of eco-friendly vehicles.

Potential Beneficiaries

It goes without saying that investors get a massive opportunity to reap tremendous gains from the industry’s growth trajectory. The Biden administration’s $15.5 billion offer is a testament to the U.S. government’s commitment to the EV transition.

Legacy automakers like Ford, General Motors and Stellantis among others, which have a significant manufacturing footprint in the United States, could leverage this funding to expedite their EV transition. EV startups like Rivian, which has repurposed traditional automotive facilities, might also find the funding beneficial in scaling up production. With a clear focus on domestic battery production, companies like Tesla (with its Gigafactory) and other battery-focused firms stand to gain. As the nation aims to reduce its dependency on foreign battery materials, companies involved in the domestic sourcing and processing of these materials could also see a boost.

Stocks to Track

General Motors, one of the world’s biggest automakers,held the largest share of the U.S. auto market at 16% in 2022.General Motors’ massive EV push is commendable. The automaker — currently carrying a Zacks Rank #3 (Hold) — plans to roll out 30 fresh EV models by 2025-end. This year, it will have nine EV models in the North America market.

Solid demand for GMC Hummer EV, Chevrolet Bolt EV and EUV, Cadillac crossover EV, Equinox EV, Silverdo EV, Sierra EV, Blazer EV and BrightDrop Zevo 600 is expected to buoy top-line growth. The firm’s modular battery platform, the Ultium Drive system, is aiding the transition to an all-electric portfolio. GM’s battery plants in Ohio, Tennessee and Lansing are likely to scale up its e-mobility prowess. The Zacks Consensus Estimate for GM’s 2023 sales implies year-over-year growth of 9.3%.

Ford, GM’s crosstown rival, is also making impressive strides in the EV domain. Mustang Mach-E is already the second best-selling electric SUV in the United States and is boosting Ford’s sales. Deliveries of E-Transit vans and F-150 e-pickups boost shipment prospects further. The company remains on track to reach an annualized EV production capacity of 600,000 units globally by the end of this year.

Its production target of more than 2 million EVs by 2026-end (representing 49% CAGR over the span of 2023-2026) augurs well for long-term growth. By 2030, Ford expects EVs to account for 50% of its global sales, which will cement its position in the red-hot EV landscape. The Zacks Consensus Estimate for F’s 2023 sales implies year-over-year growth of 7.5%. F currently carries a Zacks Rank #3.

Solid Power, which designs solid-state battery technology, made its public debut in December 2021. The company’s strategy involves licensing its designs or supplying its solid electrolyte to other battery manufacturers for production. An additional advantage lies in its compatibility with existing technologies, expediting its route to market. With ambitious plans to commence large-scale electrolyte production in 2024, scaling up to 40,000 metric tons by 2028, Solid Power aims to support the production of approximately 800,000 EVs annually. With the backing of industry giants Ford and BMW AG, the company is poised to secure a robust customer base if it can adhere to its ambitious timeline. The Zacks Consensus Estimate for SLDP’s 2023 sales implies year-over-year growth of 49%. SLDP currently carries a Zacks Rank #3.
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