Why Rivian Stock Is Surging Today

Shares of Rivian Automotive (NASDAQ: RIVN) were trading higher on Monday after California's governor said that his state could provide rebates to electric vehicle (EV) buyers if President-elect Donald Trump ends federal EV tax credits.

As of noon ET, Rivian's shares were up about 14.9% from Friday's closing price.

Image source: Rivian Automotive.

California's governor is already aiming to offset Trump's EV policies

In a statement on Monday morning, Gov. Gavin Newsom of California said that he will propose creating a new version of California's Clean Vehicle Rebate Program, or CVRP, if Trump follows through on his plan to eliminate federal tax credits for EV buyers.

The federal tax credits can provide up to $7,500 for buyers of certain new EVs. Two researchers, Joseph Shapiro of the University of California at Berkeley and Felix Tintelnot of Duke University, both of whom study the effects of environmental incentives, estimate that the elimination of the tax credits could cut U.S. demand for EVs by 27%.

That figure has been weighing on EV stocks including Rivian's since Bloomberg reported the researchers' conclusions last week.

This could do a lot to mitigate the loss of federal EV tax credits

California is by far the largest state market for electric vehicles in the U.S., with over 2 million sold to date. The CVRP provided incentives to California EV buyers until the program was discontinued in 2023.

A return of that state's incentives could offset a big part of any decline in overall U.S. EV demand should the federal tax credits be discontinued. That's why Rivian and other EV stocks are up today.

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John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.