Falls in new car prices are also putting downward pressure on used electric vehicle prices. They’re down 17 percent since July, according to Recurrent, which tracks the used-car market. That’s in large part because Tesla cut the price of the Model 3 and GM cut the price of the Chevrolet Bolt by nearly $6,000 last year. Under the Inflation Reduction Act, used cars may also qualify for a tax credit of up to $4,000. That’s 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 percent from its peak in November, though the metal is still more than twice as expensive as it was at the end of 2021. Cobalt has fallen more than half since May, partly because manufacturers of automobiles are selling some models that do not require it, reducing demand.
New lithium mines are starting to produce ore, which could limit prices. Sigma Lithium will start shipping raw material from a site in Brazil to LG Energy Solution, its main customer, starting in April, Ana Cabral Gardner, Sigma Lithium’s chief executive, 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,” said Ms. Cabral Gardner.
Of course, these advantages could disappear due to new problems in the supply chain. 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 trade partner. It’s unclear how many vehicles will meet those requirements.
Right now, Reducing Inflation Act tax credits are available for vehicles assembled in North America, which partly shields American 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 collect a tax credit indirectly if they lease foreign-made EVs.)
The Treasury Department, which is responsible for carrying out the Reduce Inflation Act, caved in to lobbying from the auto industry this month and classified several popular crossovers as SUVs instead of sedans. That allows vehicles like the Mustang Mach-E and all versions of the Model Y qualify for tax credits if they sell for $80,000 or less. Before that change, the Mustang and lighter versions of the Model Y were classified as sedans, subject to the $55,000 limit.
The decision removes some pressure on automakers to keep prices low. Tesla promptly raised the price of the Model Y by $2,000. Ford said he had no plans to raise prices for the Mach-E.
