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After examining the effects of the United States’ Inflation Reduction Act (IRA) and its effect on American electric vehicle OEMs such as Rivian (NASDAQ:RIVN), analysts of Wolfe Research have determined that the bill will accrue significant benefits to those that have geared up for vertical integration, as well as those that have secured deals with the “right” battery material supplier.
Analysts also concluded that the IRA could favor larger OEMs + Tesla (NASDAQ:TSLA) vs. smaller ones.
As far as Rivian is concerned, the company expects to meet the IRA’s requirements in full by the time they launch their R2 and R3 models in 2025. Analysts believe this will be critical to competitiveness, as these vehicles could be positioned to receive $11k-$13.5k per vehicle of government credits.
Wolfe Research also believes that Rivian may be one of a few companies positioned to take advantage of IRA credits while producing much lower-cost LFP batteries. Many companies have recently announced plans to use LFP batteries as they cost about 20% less to make and have more easily sourced and processed materials. However, the IRA’s restrictions on Chinese materials still makes sourcing these batteries problematic. However, Rivian was never planning on sourcing batteries from China, and instead was looking to produce their own proprietary LFP technology. If successful, the company could see significant cost advantages.
