This week in charts
Real estate
Crude oil
Automakers find a tax credit loophole to increase EV leasing and boost sales
Fed up with high gas prices and enticed by federal tax credits, Dave Walters decided he wanted an all-electric Hyundai Ioniq 5 for his next vehicle.
The Orange County, California, resident initially thought about purchasing a used model, until he learned he could lease the vehicle and take advantage of a key loophole under the Inflation Reduction Act.
Buying a used Ioniq, which is produced in South Korea and Indonesia, wouldn’t earn him $7,500 off through a federal tax credit. Leasing the vehicle would.
“I ran the numbers — what it would be without the leasing credit and with the leasing credit — and that kind of put me over the top and that was the main thing of why I went in that direction,” he said. “It was a few hundred dollars less a month.”
Under the IRA, leasing is categorized as commercial business and therefore exempt from regulations that require the vehicle and battery components to be made in North America. Most EVs for sale today do not qualify for the full tax credit because of where the vehicles or components are built.
But leasing could save drivers thousands, as long as the companies receiving the credits pass the savings on to consumers.
“I’m not surprised that the manufacturers are saying that they’re going to do more leasing,” said Charlie Chesbrough, Cox Automotive senior economist. “The IRA rolling on EVs and allowing them to qualify for that $7,500 really is a game-changer, and that makes a huge impact on our monthly payment.”
For a $50,000 EV and a 36-month lease, Chesbrough estimates the full $7,500 tax credit equates to $222 in monthly savings for a consumer.
Auto research firm Edmunds reports about 37% of EVs bought in April were leased, up from 25% during the first quarter and 13% last year.
“It kind of creates a loophole for automakers to target more affluent customers who are probably more likely to be able to afford and actually get approved to buy an EV,” said Jessica Caldwell, Edmunds executive director of insights. “It also allows them to level the playing field against competitors who get the full tax credit when purchasing.”
New player' in Calgary apt. market buys 263-unit property for $54M
Vancouver real estate investor Wendy Cheung has purchased a 263-unit apartment property in southeast Calgary from Canadian Apartment Properties REIT (CAPREIT) for just under $54 million.
And Cheung has plans to grow and increase her exposure to multifamily assets in Calgary and Edmonton.
Nadeem Keshavjee, president of GreenBirch Capital, which helped facilitate financing for Cheung, said the Cedar Ridge Apartments at 135 Lynnview Road S.E. sold for $53,880,000 or $204,867 per door.
“She has a number of real estate and commercial real estate holdings, but this is a notable transaction for her and she is actively looking for more,” he said. “She’s a new player in the (multifamily) market . . .
"The financing that they were able to achieve was through CMHC’s MLI (Canada Mortgage and Housing Corporation) Select program. The buyer got 95 per cent leverage and a 50-year amortization, so really attractive financing.
"There was also an element of affordable housing here. They designated 60 per cent of the units in the building to be affordable, meaning there’s a limit of how much they can raise those rents for the next 10 years. "And there’s also an energy efficient component to it as well with a commitment to improving the energy efficiency of that project by 15 per cent.”
Cheung said the most attractive part of the deal was the MLI Select financing program.
“That was the biggest reason that the numbers worked because we were able to capture a good financing component to it and then equity outlay was affordable," she explained. "Also because the building has good income and cash flow, which has runway where the rents are creeping up.”
Cheung said she has been investing in real estate for several years. Over that time, she bought single-family homes initially and land in Surrey and Langley, B.C., long before the cities developed to the current degree.
The transaction was one of a series CAPREIT has made in recent weeks as it continues to reposition its portfolio to focus on newer assets. The REIT has made six non-core dispositions in Canada – aside from the Calgary property – for a total of $121.4 million.
Walmart Cuts Starting Pay for Some New Hires
The country’s largest private employer changed its wage structure for hourly workers in mid-July, according to documents reviewed by The Wall Street Journal and Walmart employees.
Under the new structure, most new hires will earn the lowest possible hourly wage for that store. In the past, some new hires, such as those who collect items for online orders, would have made slightly more than other new staff members, such as cashiers.
The wage-structure change comes after Walmart and other large employers have for years steadily raised wages and added benefits to attract workers in a tight labor market. The retailer’s latest move suggests that the stresses companies are facing in trying to find employees are easing and that they need to find ways to offset those wage increases.
Retailers are looking at ways to reduce costs in anticipation of some consumer weakness heading into the end of the year, including the holiday shopping season, said David Bassuk, global leader of the retail practice at consulting firm AlixPartners. In general, retailers face more sales and therefore higher labor costs through the late-year holidays.
Walmart’s moves “signal the industry where things are either headed or what they should be considering,” he said. “I think we are starting to see the pendulum start to swing back to a different set of priorities.”
The broader U.S. job market is cooling. Hiring slowed this summer and the national unemployment rate rose in August to 3.8%, up from 3.5% in July—reflecting more Americans seeking work. Workers’ average hourly earnings rose 4.3% in August from a year earlier, well above the prepandemic pace.
Walmart’s move isn’t likely to lower short-term payroll costs because it is being offset by pay increases to thousands of other store staffers, some analysts said Thursday.
Some economists have found that Walmart’s market power is a primary determinant of wage levels in local economies where the company has a large presence, especially at other retailers and grocery stores.
This week’s fun finds
Drenched doubleheader
On an incredibly hot evening, EdgePoint Football Club played two tough games. The first match was close, but the heat took its toll in the second half resulting in a loss. As the sun disappeared, the squad recovered enough for a tie. The team’s season record stands at 1-2-1.
Kyle takes us on a food trip to the Middle East
For his moai (our version of bringing EdgePointers together for a meal), Kyle gave us a wealth of options to choose from.
A group of radioactive boars are trotting through Europe
Encountering a radioactive wild boar in the dark forests of Germany isn’t top of everyone’s bucket list. But, while their populations have been soaring in Europe, it’s not meeting, but rather eating them, that you need to worry about. That’s because they contain unsafe radioactive cesium (a liquid metal).
The shaggy, tusked pigs roaming around the forests of Germany and Austria were thought to have been made radioactive by the 1986 Chernobyl accident. In fact, scientists from the Vienna University of Technology, in Austria, now show that Oppenheimer-style nuclear weapons testing is responsible for their long-lasting radioactivity.
When nuclear weapons explode or nuclear energy is produced, radioactive cesium is created. When it enters the environment, it can threaten human health – and did just this when the Chernobyl power plant exploded in Ukraine almost four decades ago.
But the study, published in the journal Environmental Science & Technology, shows that the radioactive contamination affecting the boars was also caused by atmospheric nuclear weapons testing by nations across the world in the 1950s and 1960s.
Both events contaminated the radioactive boars’ food sources, including underground truffles.
