President Biden Wants Electric Vehicles to Make Up 50% of U.S. Ne…

Ford & GM Agree to Aspire to Voluntary Electric Vehicle Sales Target

On the election trail, presidential hopeful Joe Biden promised to get tough on greenhouse gas emissions. One of the first things he did after ascending to the Oval Office was issue an executive order canceling the Keystone XL pipeline.

Ironically, he has since asked Saudi Arabia and the rest of the Organization of the Petroleum Exporting Countries (OPEC) to hike their oil production to combat rising gas prices. But I digress.

On August 5, President Biden signed an executive order that aims to make half of the country’s new vehicle sales electric by 2030. The executive order covers more than just electric vehicles; it also includes hydrogen fuel-cell and plug-in hybrid vehicles. (Source: “Fact Sheet: President Biden Announces Steps to Drive American Leadership Forward on Clean Cars and Trucks,” The White House, August 4, 2021.)

The 50% target is voluntary, but the Big Three auto companies—General Motors Company (NYSE:GM), Ford Motor Company (NYSE:F), and Stellantis NV (NYSE:STLA)—have all agreed to try to hit this target.

In a joint statement, the three automakers said they could only meet the voluntary targets for electric vehicle sales if they get billions of dollars in government funding, including consumer subsidies, electric vehicle charging stations, investments in research and development, and incentives to expand the electric vehicle manufacturing and supply chains.

The Big Three are already spending tens of billions of dollars in an effort to speed up the adoption of electric vehicles. But so far, U.S. sales of electric vehicles remain relatively low, just three percent of total vehicle sales.

To help boost the adoption of electric vehicles, the Senate infrastructure bill includes more than $6.0 billion in grants for battery production, development, and recycling. (Source: “Biden Toughens Fuel-Efficiency Standards, Challenges Auto Makers to Sell More EVs,” The Wall Street Journal, August 5, 2021.)

The bill also sets aside $7.5 billion in grants for states and municipalities to build electric vehicle charging stations.

Biden’s goal is to have 500,000 public charging stations by 2030. Right now, there are about 110,000 such stations in the U.S.

Biden’s Electric Vehicle Goal Gets Mixed Reactions

General Motors, Ford, and Stellantis (the parent company of Chrysler) might be on board with Biden’s plan, but the transition from internal combustion to electric vehicles isn’t as straightforward as swapping out engines. The shift to electric vehicles could weigh heavily on the profits of automakers for years.

A Morgan Stanley (NYSE:MS) analyst noted that the odds of the auto industry transitioning from internal combustion to electric vehicles “without a major disruption in margins is remote.” (Source: Ibid.)

While California and certain countries have set 2035 as the year in which sales of new gas-powered light-duty vehicles will be phased out, Biden has bristled at the notion of setting up similar binding requirements. (Source: “Biden to Set Target for 50% EVs by 2030; Industry Backs Goal,” Reuters, August 5, 2021.)

Ray Curry, president of the United Auto Workers (UAW), said the union supports Biden’s efforts, but that those efforts aren’t the union’s focus.

“[T]he UAW focus is not on hard deadlines or percentages, but on preserving the wages and benefits that have been the heart and soul of the American middle class,” said Curry. (Source: Ibid.)

Analyst Take

Biden’s electric vehicle sales target is ambitious, but it’s fair to say that the path to green glory will hit more than a few speed bumps along the way.

That doesn’t mean there won’t be a number of electric vehicle stocks that will benefit from the boom in electric vehicle sales.

Investments in electric vehicles are expected to total $330.0 billion by 2025. For Biden to see electric vehicle sales jump from the current three percent of new vehicle sales to 50% by 2030, that dollar figure will need to become significantly higher.

In addition to automaker stocks, other stocks that should do well in the coming years include electric vehicle battery stocks, electric vehicle charging station stocks, and electric vehicle metal miners.