Declines in new car prices are pushing down used electric vehicle prices, too. They have fallen 17 percent since July, according to Recurrent, which tracks the used car market. That’s largely because of Tesla cutting the price of the Model 3 and G.M. lowering the price of the Chevrolet Bolt by almost $6,000 last year. Under the Inflation Reduction Act, used cars can also qualify for a tax credit of up to $4,000. That is important because most people buy used vehicles.
Falling prices for materials like lithium and cobalt have also helped. The price of lithium used in batteries has fallen 20 percent from its peak in November, though the metal still costs more than twice as much as it did at the end of 2021. Cobalt has fallen by more than half since May, in part because carmakers are selling some models that do not require it, reducing demand.
New lithium mines are beginning to produce ore, which could keep a lid on 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, 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,” Ms. Cabral Gardner said.
Of course, these advantages could fade because of new supply chain problems. Lithium remains in short supply and prices could spike again. Beginning 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 U.S. trade ally. It is unclear how many vehicles will meet those requirements.
Right now, the Inflation Reduction Act tax credits are available to vehicles assembled in North America, which partially shields the U.S. automakers from competitors like Hyundai. The company’s Ioniq 5 has sold well but it is imported from South Korea. Hyundai is building a factory in Georgia that will start assembling electric vehicles in 2025. (Buyers may still collect a tax credit indirectly if they lease foreign-made electric vehicles.)
The Treasury Department, which is responsible for carrying out the Inflation Reduction Act, gave in to auto industry lobbying this month and classified several popular crossovers as S.U.V.s rather than sedans. That 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. Before that 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 the carmakers’ 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 of the Mach-E.