What happened

Shares of Ford (F 0.08%) rebounded partly from Monday's 7% stock sell-off, gaining 3.6% through 11:10 a.m. ET this morning.

Ford stock appears to be responding to news that first emerged midday yesterday but seems to have been lost in the panicked sell-off. Ford and fellow automakers General Motors, Stellantis, and Toyota are lobbying Congress for an expansion of income tax credits tied to the purchase of electric vehicles (EVs).    

So what

Under current law, Congress allows new-car buyers to claim as much as a $7,500 federal income tax credit when they purchase an EV -- up to a point. Once an automaker has sold 200,000 EVs, tax credits for further sales begin to phase out. Ford rival GM has already hit this cap, as has Tesla, although Elon Musk went on record last year saying he no longer wants or needs subsidies from the federal government.

In Ford's case, the company has sold more than 160,000 EVs already. Its tax credits are close to being all used up. And once that happens, the cost of a Mustang Mach-E electric SUV or Ford F-150 Lightning electric truck, for example, will effectively go up by $7,500 as compared to past prices, potentially hurting sales.

Now what

Ford and its peers (Tesla excepted) are asking Congress to lift the cap on subsidies such that cars sold in excess of the current 200,000-vehicle cap will also receive the full $7,500 tax credit. Investors apparently like the idea, but a previous effort to get Congress to underwrite a $12,500 tax credit as part of President Joe Biden's Build Back Better plan already has failed.

Moreover, with gas prices surging, consumers already have a pretty big incentive to buy EVs, without Congress having to spend a dime. This tends to weaken the argument that an extension or expansion of tax credits is really necessary.

My guess: Ford and its friends will fail to sway Congress on this question, and investors betting otherwise today are betting wrong. The good news: With gas over $5 a gallon and speeding toward $6, that might not make any difference, and Ford's EV business should do just fine regardless.