Rivian's Shares Decline Once More due to Concerns over Tax Credits
Shares of Rivian Automotive (RIVN 1.67%) are experiencing a second straight decline on a Friday, after Reuters released information about the incoming Trump administration's intentions to eliminate the electric vehicle (EV) tax credit program.
By 10:30 a.m. ET, Rivian's shares had dropped approximately 4.7% compared to the closing price from the previous day.
Widespread concerns for the U.S. EV market in case the tax credit program is abolished
Rivian's shares witnessed a decline of more than 14% on Thursday, following Reuters' disclosure that Trump's transition team is considering terminating the consumer tax incentive for purchasing EVs as part of a larger tax restructuring initiative.
These incentives offer a maximum discount of $7,500 to buyers of certain electric vehicles. This program was designed to offer automakers some leeway in the increase of EV production, allowing them to pass on a part of their initial expenses to consumers.
Importantly, according to Reuters, Tesla, the largest U.S. electric vehicle manufacturer, has reportedly expressed their support to eliminate these incentives. While Tesla, being a mature EV manufacturer, might not require this additional assistance, companies still struggling with generating profits during their EV production expansion, such as legacy corporations like Ford Motor Company (F -3.61%) and new entrants like Rivian and Lucid (LCID -0.58%), could face challenges in the absence of the tax incentive program.
Rivian has some safeguards, but EV investors should remain cautious
An end to U.S. EV tax incentives is unlikely to completely destabilize Rivian. Its recent $5.8 billion partnership with the German auto conglomerate Volkswagen (VWAGY -2.55%), which was finalized earlier this week, should shield Rivian from potential demand fluctuations in the U.S. market.
However, this decision to eliminate the tax incentives is a concern for investors in the electric vehicle sector at large, and it comes as no surprise that Rivian's shares have seen a decline in value in the wake of this information.
The potential elimination of the EV tax credit program could significantly impact the profitability of EV manufacturers, including Ford Motor Company and new entrants like Rivian and Lucid. Thus, investors in the electric vehicle sector should closely monitor this situation.
Given the financial implications of this decision, investors should consider diversifying their portfolio, potentially exploring opportunities in overseas markets or alternative sectors that are less reliant on government incentives for growth.
