Rivian Is Getting a Boost From California. Could Other States Follow Suit?
Key Points
Rivian Automotive's stock is down more than 80% from its all-time high.
The company's new R2 fleet is priced more affordably to appeal to a mass market.
Several states offer varying levels of incentives and credits for the purchase of an electric vehicle.
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The elimination of the $7,500 federal electric vehicle (EV) tax credit was a hard hit for most automakers, but Rivian Automotive (NASDAQ: RIVN) was especially affected. EV demand had already stalled, but without tax incentives, they became a harder sell than gas-powered vehicles.
The state of California is taking action to incentivize car buyers to go green once again. The state has a new $135 million program to help first-time EV buyers through point-of-sale rebates. No tax filing is necessary.
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There is a catch that helps Rivian in particular but hurts its competitor, Tesla (NASDAQ: TSLA). Incentives are available only for automobiles priced at or below $50,000 new and $25,000 used. The credit offers a $3,500 rebate for new vehicles and a $1,750 rebate for used vehicles. This immediately disqualifies most Tesla models, which are most often priced at luxury levels. The new Rivian R2 fleet, designed to be more affordable, starts at around $45,000.
The incentive also waives the price cap entirely if the automaker is headquartered in California. Rivian is based in Irvine, while Tesla relocated to Texas.
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This is great news for Rivian. The R2 fleet is generating significant interest, and state tax incentives could push fence-sitters into a Rivian. California's model could also serve as a template for other states looking to make up for the lost federal benefits.
Several states offer benefits for EV and hybrid car purchases, but California could start a trend of states increasing tax credits or even matching the previously available federal credit. Any move in this direction would be welcome news for Rivian and other EV manufacturers looking to reignite demand.
Rivian's investors have patiently waited for the stock to rebound after losing over 80% of its value since going public in 2021. While the company's software and services segment is profitable, its automotive division is not. The R2's efforts to appeal to a mass market could benefit from state tax credits. Investors will need to remain patient as legislative efforts to boost EVs take time.
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Catie Hogan has positions in Rivian Automotive. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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