Electric vehicles could match the price of gasoline cars this year

Falling new car prices are also driving down the prices of used electric vehicles. They have fallen 17% 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 Reducing Inflation Act, used cars can also qualify for a tax credit of up to $4,000. This is important because most people buy used vehicles.

Falling prices for materials like lithium and cobalt also helped. The price of lithium used in batteries has fallen 20% from its peak in November, although the metal still costs more than double what it was at the end of 2021. Cobalt has fallen by more than half since May, partly because automakers are selling models that don’t need it, reducing demand.

New lithium mines are starting to produce ore, which could limit prices. Sigma Lithium will begin shipping raw materials from a site in Brazil to LG Energy Solution, its main customer, as early as April, Sigma Lithium managing director Ana Cabral Gardner said in an interview. The site will be the first new lithium source in Latin America for several years.

“It’s doable, and we’re there,” Ms. Cabral Gardner said.

Of course, these benefits could fade due to new supply chain issues. Lithium remains scarce and prices could rise further. Starting next month, new regulations governing the $7,500 tax credits will require electric car batteries to be manufactured in the United States, Canada or Mexico with raw materials from North America or Mexico. another trade ally of the United States. It is unclear how many vehicles will meet these requirements.

Currently, Inflation Reduction Act tax credits are available for vehicles assembled in North America, which in part protects 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 plant in Georgia that will begin assembling electric vehicles in 2025. (Buyers can still indirectly receive a tax credit if they lease foreign-made electric vehicles.)

The Treasury Department, which is responsible for enforcing the Cut Inflation Act, bowed to auto industry lobbying this month and classified several popular crossovers as SUVs rather than 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 Model Y versions were classified as sedans, subject to the $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.