EV Tax Credits Are Ending—Here’s Why These 2 Stocks Could Soar
Understanding the electric vehicle market has become increasingly important over the past several years as EV sales have really started to explode.
Looking forward, EVs are likely to become a larger part of the overall economy, presenting a significant opportunity for investors. The International Energy Agency reported that in 2024, 20% of new cars sold were electric vehicles. They expect this number to grow to 40% by 2030, positioning EVs as a clear growth market. However, the path to this is not likely to be a straight one, especially as government attitudes toward EVs shift.
Take the passing of President Trump’s “One Big Beautiful Bill” for example. It means that the significant tax breaks that come from buying EVs in the United States will expire in September, which will weigh on adoption. Despite this, analysts expect the EV market to grow.
VinFast Auto (NASDAQ: VFS) and Lucid Group (NASDAQ: LCID) stand out as two electric vehicle stocks with high upside potential, positioned to benefit from shifting market dynamics and evolving U.S. policies.
Big Beautiful Bill Increases VinFast’s Chances of U.S. Success
VinFast makes and sells relatively low-cost EVs primarily in Vietnam. The MarketBeat consensus price target on the company is $5.75, implying that shares could rise by nearly 64%.
Ending the EV tax credit actually helps VinFast. Its vehicles were not eligible to receive it before, putting it at a disadvantage in the U.S. market. Now, the playing field will become more level as domestic companies will no longer receive the credit either.
VinFast's sales in the United States are very limited, comprising only 6.2% of total revenues in 2024. Thus, the United States represents a significant growth opportunity for VinFast that just became easier to capitalize on. However, the company must deal with 25% automotive tariffs, which hurt its competitiveness in the United States.
Still, Vinfast clearly doesn’t need the United States to grow fast. EV deliveries spiked 296% last quarter, while E-scooter deliveries rose 473%. The company is still deeply unprofitable, with a gross margin of negative 35%. However, this figure is a big improvement over its negative 59% gross margin a year ago. VinFast will need to continue making progress here by accelerating production and deliveries to achieve greater economies of scale. The recent opening of the company’s second factory should aid this. The company also just signed with its first authorized dealership in California as it looks to expand its U.S. presence.
Recent Price Targets Indicate +40% Upside in Lucid
The MarketBeat consensus price target on Lucid is $2.68, implying a solid but not huge 27% upside in shares. However, focusing on the stock’s two most recent price target updates paints a considerably more bullish picture. Both come in at $3, which implies 42% upside in shares.
In contrast to VinFast, most of the company’s revenue comes from the United States, accounting for around 73% of its total sales in 2024. The rest of the company’s sales primarily come from Saudi Arabia. The company will no longer be able to benefit from tax credits post-September, but some believe that this will actually help Lucid.
That includes James Picariello of BNP Paribas. He believes that the sunsetting of the credit means that Lucid will face less EV competition. This is because companies that make both EVs and gas-powered vehicles may “deemphasize” their EV ambitions in the United States as government incentives go away. This is plausible, but it is also important to note that companies like Ford Motor (NYSE: F) have invested billions in their EV efforts. Given the long-term growth many see in this market, they are not likely to simply hand over this growth to EV pure plays.
In Q2, Lucid’s vehicle deliveries hit 3,309, rising by 38% compared to the same period a year ago. Like many early-stage EV makers, Lucid remains highly unprofitable. It will need to significantly boost deliveries to change this.
Winning in the United States Is Key to VinFast and Lucid’s Success
VinFast and Lucid are attempting to compete in the crowded U.S. vehicle market. Success will be key to achieving the scale required to be profitable one day. With EV tax credits set to expire soon, shifts in the competitive landscape may help their ambitions, which could help shares achieve the significant upside some analysts see.
All data uses information as of the July 7 close unless otherwise indicated.
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