On Saturday November 7, Democratic Candidate Joe Biden was announced as the winner of the 2020 US Presidential elections. One of president-elect’s main programs is to implement an economic model that focuses on green solutions and clean energy. Here’s how Tesla can become one of the main beneficiaries of Joe Biden’s economic plan.
What are the Main Points of Biden’s Economic Plan?
The former Vice-President’s economic plan has two key objectives:
- Commit to a 100% clean energy economy and enable the United States to achieve net-zero emissions by 2050.
- Tackle climate change by integrating it into the US’ foreign policy, national security and international trade strategies.
In order to achieve those objectives, Biden is set to commit significant financial resources. Biden has pledged $1.7 trillion in federal spending on climate and environmental programs “over the next ten years”. Additionally, the US government plans to leverage “additional private sector and state and local investments” to more than $5 trillion.
The federal government will also spend $2 trillion on accelerated investments. According to the Biden Plan, this will put America “on an irreversible course to meet the ambitious climate progress that science demands”.
What is Biden’s Plan of Action for the US Auto Industry?
The Biden Plan is set to drastically favor EVs at the expense of ICE-powered cars:
“Auto Industry: Create 1 million new jobs in the American auto industry, domestic auto supply chains, and auto infrastructure, from parts to materials to electric vehicle charging stations, positioning American auto workers and manufacturers to win the 21st century; and invest in U.S. auto workers to ensure their jobs are good jobs with a choice to join a union”.
The Biden Plan will heavily subsidize EVs and accelerate the rollout of charging stations.. The plan explicitly stated that EV charging stations will be increased to 500,000, up from the current levels of approximately 27,000.
Biden is also committed to increase federal procurement by $400 billion through “purchasing the clean energy inputs like batteries and electric vehicles”. Federal procurement is the acquisition of goods and services on behalf of the federal government. More specifically, a Biden-led administration will increase federal subsidies for the EV industry by $400 billion in its first term.
The Potential Effects on Tesla
It is very clear that Joe Biden wants to take an active role in accelerating the transition towards electric vehicles.
Tesla has performed brilliantly throughout 2020. The automaker has announced record production and delivery numbers during Q3. Additionally, Tesla has started to show consistent profitability. Q3 marked the fifth consecutive quarter of positive earnings.
All signs point toward an increasingly bullish outlook for Tesla under a Biden administration. According to Garrett Nelson, Tesla “would be one of the biggest winners as an EV pure play”. Nelson increased his price target for Tesla shares to $550 in the short term.
All in all, when Joe Biden is sworn into office, we are looking at a surefire inclusion of Tesla into the S&P 500. The company became the largest automaker by market cap this year, and is currently standing at more than $400 billion. Tesla shares are also up by more than 385% this year, and are currently valued at $429.95 per.
Under Joe Biden, Tesla could be on track to become the first-ever automaker in history valued at $1 trillion.