What happened
Shares of General Motors (GM 0.46%) jumped as much as 6% Monday after the Senate passed the Inflation Reduction Act Sunday, which has some major climate change provisions to help electric vehicle (EV) sales. GM stock was still up 4.7% as of 3:32 p.m. ET.
So what
The new legislation passed by the Senate this weekend is now likely to be approved by the House of Representatives and signed into law by President Joe Biden. It's especially meaningful for General Motors thanks to its extension of EV tax credits for consumers, including for those buying established EV maker vehicles. Prior credits ended after a manufacturer sold its 200,000th electric vehicle. But this bill replaces that provision with several other requirements. Importantly for GM, some of its offerings will now qualify even with the newer restrictions.
Now what
GM has been in the EV business for more than a decade with its Chevrolet Volt. It has sold enough to surpass the existing tax credit limit. GM is now ramping up its EV offerings, and plans to exclusively offer electric vehicles by 2035.
A new requirement for $7,500 tax credits on new electric cars will be a cap on the vehicle cost of $55,000. The Volt will continue to qualify, though some of GM's newer offerings will not.
For now, GM is still mainly an internal combustion engine automaker, and it is using those profits to invest in its EV growth business. GM reported $3.1 billion in net cash provided by operations in the second quarter to help fund that growth. For the first half of 2022, GM generated more than $5 billion in operating cash. But investors are more than happy for the company to qualify for some help in advancing its EV business. Today's pop in GM shares represents that outlook.
