Inflation Reduction Act to Boost Rivian, Lucid as EV Tax Credit Phases Out

The recent passage of the "Inflation Reduction Act" by the U.S. Congress is expected to significantly impact the electric vehicle (EV) market, particularly benefiting companies like Rivian and Lucid. The act, set to take effect from September 30, will phase out the $7,500 consumer tax credit for electric vehicles, a move that analysts predict will reduce demand and competition in the EV sector. This shift is anticipated to create a more favorable environment for Rivian and Lucid, as traditional automakers may slow down their expansion plans due to the reduced government subsidies and softer consumer demand.

Analysts suggest that the reduction in competition from traditional automakers will allow Rivian and Lucid to capture a larger market share. This is particularly relevant given the current market sentiment, which has been negatively impacted by uncertainties surrounding trade policies and other macroeconomic pressures. The analysts also note that Rivian may benefit from the negative sentiment surrounding Tesla, as consumers look for alternatives to Tesla's offerings.

Despite recent underperformance in their second-quarter delivery figures, with Rivian delivering 10,661 vehicles and Lucid delivering 3,309 vehicles—both below expectations—analysts expect a rebound in the third quarter as consumers rush to purchase EVs before the tax credit expires. The analysts highlight that Rivian's faster production ramp-up and Lucid's delayed release of new models, such as the Gravity SUV scheduled for 2025 and the crossover vehicle for 2027, may result in Rivian benefiting more significantly from the new policy changes.

Analysts have maintained a "buy" rating for Rivian and a "hold" rating for Lucid, reflecting their confidence in Rivian's ability to capitalize on the current market dynamics more effectively than Lucid. Overall, the passage of the "Inflation Reduction Act" is seen as a potential boon for the EV sector, particularly for companies like Rivian and Lucid, which are well-positioned to navigate the changing landscape and capture a larger share of the market.