What happened
ChargePoint Holdings (CHPT +15.29%), Volta (VLTA +0.00%), and Arrival (ARVL +0.00%) are all early-stage electric vehicle (EV) companies. Another thing they have in common is that they are all losing money as they invest to grow their respective businesses. But today, these stocks are all rising. At 10:50 a.m. ET, shares of EV charging networks ChargePoint and Volta were up 4.1% and 19.1%, respectively. The stock of EV start-up Arrival was 12.1% higher.
So what
The reason for the moves was optimism and excitement generated by the U.S. Senate passing the Inflation Reduction Act over the weekend. The legislation that contains more than $300 billion to support clean energy development and electric car demand seems to now have a clear path to becoming law.
NYSE: CHPT
Key Data Points
Based on the strength of today's stock moves, investors seem to think the additional investments in the sector will be more meaningful for Volta and Arrival. That makes sense, as ChargePoint is already a much more established business after generating $242 million in revenue for its 2022 fiscal year, which ended Jan. 31. ChargePoint also already expects that amount to approximately double in its current fiscal year.
Now what
Investor optimism today comes after the Senate passed the legislation, which contains more than $300 billion aimed at boosting clean energy and addressing climate change. It calls for the extension of a consumer income tax credit of potentially up to a $7,500 for the purchase of new EVs and a new $4,000 credit for buying a used electric vehicle.
While there are cost caps of $55,000 for cars and $80,000 for trucks and vans, charging network companies like ChargePoint and Volta want to see any boost to increase ownership of electric vehicles.
NYSE: VLTA
Key Data Points
As these companies have yet to turn profits, they want EV adoption to speed up. ChargePoint still had $541 million in cash on its balance sheet on April 30, but it reported a net loss of nearly $90 million for the quarterly reporting period. Volta reported a net loss of $48 million in the 2022 first quarter and held only $205 million in cash and marketable securities on March 31.
OTC: ARVL
Key Data Points
One provision of the Inflation Reduction Act is that these vehicles must be built in the U.S., and it has some varying requirements for the parts to also be made in America. Arrival plans to use local microfactories to build its bus, van, and future electric car offerings. Having the plants in the U.S. could qualify the start-up to take advantage of the bill, too.
Investors see the legislation as something of a lifeline for these struggling businesses. These stocks have already been hit this year, along with many other growth and tech stocks. Even with today's bump, Volta shares are down 62% year to date, and Arrival has dropped 75% this year. That also helps explain the outsize gains today after what should be longer-term positive news for the entire sector.
