Electric Car Tax Breaks: Will Battery Makers Benefit?

Electric Car Tax Breaks: Will Battery Makers Benefit

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In a minor sign of sanity on Monday among clean transportation stock investors, a major headline regarding corporate America calling for federal subsidies to support electric car purchases failed to cause lithium-ion battery makers to pop. Maybe all those quarterly losses and rising expenses have finally tightened investors wallets when it comes to funding the next round of stock purchases in the clean transportation universe of stocks.

Big-picture headlines have the power to move clean transportation stocks more than earnings fundamentals. It's understandable, at least at this point, as these companies don't have profits to speak of. It also gets out of hand, headline to headline, as a lithium-ion battery maker like A123 Systems(AONE_) pops when General Electric(GE_) says it plans to convert a significant chunk of its corporate fleet to electric cars. Mind you, A123 doesn't even have its lithium-ion batteries available in a current model, but the fact that one of its financial backers, GE, is even moving in the direction of electric cars is enough to rally A123 shares, regardless of another earnings disappointment.

GE Volt Buy: Will it Jolt the Lithium Battery Makers?

The natural gas vehicle sector and companies including Clean Energy Fuels(CLNE_) and Westport Innovations(WPRT_) are well aware of this headline rally effect. For much of 2010, the natural gas vehicle stocks have been trading up or down based on the outlook for energy legislation that would double subsidies for natural gas vehicle purchases.

T. Boone Pickens was the front man for the campaign for the Natural Gas Act being included in an energy bill. When the legislation seemed about to pass, the natural gas vehicle stocks popped. When the legislative outlook dimmed, the natural gas vehicle stocks sold off. The nat gas vehicle stocks are back at the game of lobbying after the mid-term elections, now trying to find a way to get the Nat Gas bill inserted in lame duck energy legislation or legislation in the next Congress.

All the action in the nat gas vehicle space, from the legislative highs to the continuing legislative lull, should make an investor doubt hyperbolic words about federal support for clean transportation. The latest clean transportation legislative wish list came courtesy of the Electrification Coalition and its friends at FedEx(FDX_) on Monday. The lobby group held a news conference in Washington D.C. where FedEx CEO Fred Smith called for tax credits to spur the sale of electric vehicle corporate and government fleets to the level of 200,000 vehicles by 2015.

Last week, GE announced plans to purchase 25,000 electric vehicles.

The FedEx CEO referred to the use of electric vehicles as "the single most important initiative" in making the U.S. energy self-sufficient, arguably the boldest rhetorical salvo of the electric car lobbying event.

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