Falling new car prices are also driving down used electric vehicle prices. They have fallen 17 percent since July, according to Recurrent, which tracks the used car market. That’s largely because Tesla cut the price of the Model 3 and GM dropped the price of the Chevrolet Bolt by nearly $6,000 last year. Under the Inflation Reduction Act, used cars also qualify for a tax credit of up to $4,000. This is important because most people buy used vehicles.
Falling prices for materials such as lithium and cobalt have also helped. The price of lithium used in batteries has fallen 20 percent from a peak in November, although the metal still costs more than double what it was at the end of 2021. Cobalt has more than halved since May, partly because automakers are selling some models that don’t require it, reducing demand.
New lithium mines are starting to produce ore, which could cap prices. Sigma Lithium will begin shipping raw material from a site in Brazil to LG Energy Solution, its main customer, as early as April, Ana Cabral Gardner, chief executive of Sigma Lithium, said in an interview. The site will be the first new source of lithium in Latin America for several years. “It’s doable and we’re there,” Cabral Gardner said.
Of course, these advantages could fade due to new supply chain issues. Lithium remains in short supply and prices could rise again. Starting next month, new regulations governing the $7,500 tax credits will require electric car batteries to be made in the United States, Canada or Mexico with raw materials from North America or another US trading ally. It is not clear how many vehicles will meet these requirements.
Right now, Inflation Reduction Act tax credits are available for vehicles assembled in North America, partially protecting US automakers from competitors like Hyundai. The company’s Ioniq 5 has sold well, but it’s imported from South Korea. Hyundai is building a factory in Georgia that will begin assembling electric vehicles in 2025. (Buyers can still get an indirect tax credit if they lease foreign-made electric vehicles.)
The Treasury Department, responsible for carrying out the Inflation Reduction Act, caved to the auto industry lobby this month and classified several popular crossovers as SUVs instead of sedans. This allows vehicles like the Mustang Mach-E and all versions of the Model Y to qualify for tax credits if they sell for $80,000 or less. Prior to this change, the Mustang and lighter versions of the Model Y were classified as sedans, subject to a $55,000 limit.
The decision removes some pressure on automakers to keep prices low. Tesla quickly raised the price of the Model Y by $2,000. Ford said it has no plans to raise prices for the Mach-E.
