Tesla (NASDAQ:TSLA), the largest domestic electric vehicle (EV) manufacturer, is experiencing a rough 2021. The shares are off 18.11% (as of May 18), and that slump is affecting an array of exchange traded funds, including the ARK Innovation ETF (NYSEArca: ARKK).

ARKK allocates nearly 10% of its weight to Elon Musk’s company, making it one of the largest Tesla holders among all ETFs. The ARK Autonomous Technology & Robotics ETF (CBOE: ARKQ) devotes just over 10% of its lineup to Tesla while the ARK Web x.0 ETF (NYSEArca: ARKW) has a roughly 10% weight to the EV giant.

Obviously, those aren’t favorable points given the fact that the stock is down 18%. Yet Tesla could be poised to rebound because the White House is putting EV adoption front and center in President Biden’s massive infrastructure package.

“About $174 billion of the infrastructure bill is dedicated to a wide range of green initiatives, including building out and supporting the transition to electric vehicles,” says Morningstar analyst Dave Sekera.

Tesla and Tax Credits

Within the Biden proposal is a tax credit plan aimed at motivating car buyers to go electric.

“One of the initiatives is a tax credit paid out for the purchase of new electric vehicles, including autos as well as buses and trucks,” adds Sekera. “We currently forecast that by 2030, about 20% of new-vehicle sales in the United States will be battery electric vehicles and another 30% will be hybrids. But if the infrastructure plan is enacted as proposed, we expect this adoption rate will be even higher.”

This tax credit is a potentially material issue because Tesla is considered a luxury brand. Its sticker prices are more in the Mercedes/BMW stratosphere, not the Chevy/Ford realm. Any avenue to defray some of this cost could be attractive to would-be Tesla buyers.

As for ARK Invest, the fund manager remains a fan of Tesla, and is buying on the recent dip. Cathie Wood’s firm bought 47,000 shares in Musk’s company on Tuesday – ARK’s first purchase of the stock in a month. That purchase was directed to the aforementioned ARKQ.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.