How A New Bill Could Pick Winners In The U.S. Auto Sector

Dr. Gregor Bauer breaks down how new electric car regulations could overhaul the U.S. auto industry - and many auto stocks. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   How A New Bill Could Pick Winners In The U.S. Auto Sector Dear Reader, Have you been shopping around for an electric car in the last few months? If so, you may have noticed that companies are advertising lavish government subsidies. In fact, electric vehicles (EV) are currently only conceivable at all because of these subsidies. Without taxpayers' money, the whole technology would simply not yet be competitive with internal combustion engine (ICE) vehicles in view of electric cars’ higher production costs. President Biden, however, seems intent on strengthening this subsidy regime. He wants at least half of all new cars sold in the U.S. by 2030 to be electric. Biden pumps triple-digit billions into e-mobility To make this happen, Biden’s infrastructure plan calls for a $174 billion investment in electromobility. A gigantic portion of that is earmarked for the development of charging infrastructure and battery production, but a substantial amount will also fund purchase incentives. At the moment, there is a $7,500 tax credit on e-car purchases in the US.  Source: [(  Of course, this is not only appealing for EV buyers, but also for EV company shareholders. After all, the subsidies support sales. But now that could change, at least for some corporations. New draft law causes a furor A few days ago, the Democrats presented a controversial new bill which would overhaul EV subsidy regulations. It provides for a tax credit of up to $12,500 for the purchase of electric cars - $5,000 more than before. The controversial part is that Biden's party only wants to give the subsidy increase to manufacturers whose US workforces are unionized. That, of course, pleases the Big Three: General Motors ([GM]( Ford ([F]( and Stellantis ([STLA](. Bad news for Tesla That provision would notably exclude Tesla ([TSLA](. Although the company is the largest EV manufacturer in the US, its employees are not unionized. Company boss Elon Musk has been at loggerheads with employee representatives for years over a variety of labor issues. Critics have even accused the billionaire of immediately firing employees who discussed unionization. So far, this has been rather positive for investors. Tesla has been able to control its personnel costs without input from unions, giving it more flexibility than its organized rivals. With the change in subsidies pushed by the Democrats, this advantage could become a liability - with possible negative consequences for its share price. 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Toyota, for example, said that the bill discriminated against American car workers who decide not to join a union. Honda echoed the same sentiment, calling for equal treatment for all employees. My conclusion for you For now, the bill is far from becoming law. But as an investor, you should follow political developments like these all the more closely if you want to invest in manufacturers that do business in the US. General Motors, Ford and Stellantis subsidiary Chrysler have all expressed their confidence in the new legislation - and no wonder. It could give their shares an extra competitive moat. Dr. Gregor Bauer Chief Analyst, European Markets © 2021 Godesburg Financial Publishing, Inc. 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