Selling EVs in America’s heartland was the goal in 2022, and it remains central going into 2023, thanks to new federal tax credits.
Selling an electric vehicle to the average Joe and Jane has been one of the automotive sector’s missions this year.
While clean-energy vehicles are now embraced, their prices have made them an auto-industry segment that so far appeals to consumers with above-average incomes. But in 2022 the situation seems to have changed.
Carmakers, most of which intend to offer at least one electric vehicle in the coming months, have effectively launched an operation to conquer the American market, both in terms of price and models.
F-150 EV: Lightning From the Blue Oval
Ford (F) – Get Free Report focused on the model.
The Dearborn, Mich., automotive stalwart started production and deliveries of the F-150 Lightning, the electric version of the iconic F-150 pickup truck.
The F-150 has long been America’s favorite truck. It consistently beats every other truck in its class in sales, while attracting more and more consumers, who use it for everything from ranching to just driving around for fun.
Ford sells more than a million of them a year, a pace that seems even more impressive when you think of it as the company delivering more than 100 of them every hour.
The F-150 has fan clubs, more repeat buyers than other trucks, and even its own hashtag on Twitter.
Since this truck is driven in some of the world’s most remote parts, and in some of the longest empty stretches of America, analysts had wondered how long the range of its electric sibling would be.
Ford said that the truck would have a range of 230 miles to 320 miles, depending on the model. All versions of the Lightning can be connected to the Blue Oval Charge Network, a string of 70,000 chargers throughout North America, maintained by Ford.
The bet seems to be working, since Ford has just added a third shift in the Michigan plant in charge of assembling the F-150 Lightning. The plant is now running three rotating crews of workers on 10-hour shifts seven days a week.
The move is part of Ford’s ambition to produce 150,000 units of the F-150 Lightning a year by mid-2023 to satisfy the strong consumer demand, the company said last January. Initially, Ford had planned to produce only 40,000 units a year.
Economic Slowdown Looms; So Do Rivals
In the coming months, the F-150 Lightning will face the arrival on the market of the electric version of the Chevrolet Silverado (GM) – Get Free Report, another popular vehicle in the heartland of America, and of Tesla’s (TSLA) – Get Free Report Cybertruck.
These two vehicles should help expand the adoption of electric vehicles beyond the urban, young and affluent public.
Also on the supply side, Fisker (FSR) – Get Free Report, General Motors and others are announcing electric vehicles whose price would be below $30,000 after tax credits and various incentives.
This is timely since the current economic slowdown is likely to hurt vehicle sales. High prices deter consumers interested in clean-energy vehicles, when they are also faced with high interest rates on their car loans.
The average annual percentage rate for financing a new-vehicle purchase climbed to 6.3% in October 2022 from 4.2% in October 2021, the highest new vehicle APR since April 2019, according to Edmunds.com.
The average APR for a used vehicle purchase climbed to 9.6% in October 2022 from 7.4% in October 2021, the highest since February 2010, Edmunds says.
But the auto industry has received a huge gift in the form of extended federal tax credits. President Joe Biden, who has made the adoption of green cars one of his priorities, included tax credits in the Inflation Reduction Act, signed last August, to encourage consumers to choose electric vehicles when they buy cars.
Tax Credits Under the New Law
Under the new law, the federal tax credit for EVs remains at $7,500. The eligibility period is from January 2023 to December 2032. The existing tax credit limitation when a car manufacturer has sold the 200,000th unit is eliminated. Tesla, General Motors and Toyota (TM) – Get Free Report, whose cars no longer were eligible for current tax credits, are eligible again beginning Jan. 1, 2023.
The tax credit of $7,500 is divided in two: $3,750 will apply if at least 40% of the minerals of the battery powering the vehicle come from the U.S. or a country having a free-trade agreement with the U.S.
The other $3,750 will apply if at least 50% of the battery components come from the U.S. or from countries with a free-trade agreement with the U.S.
In summary, the electric vehicle you buy can benefit from the full $7,500 tax credit, half or none, depending on the battery components and minerals.
SUVs, pickup trucks and vans costing more than $80,000 are excluded, as are consumers with high incomes. Some cars must cost less than $55,000.
The White House’s goal is to promote the sale of EVs at affordable prices and encourage American consumers to buy them.
From 2024, consumers will be able to deduct the tax credit directly from the dealer. Until then, this will be done when they file their tax returns in April of each year (as was the case before).
“To really get all companies and consumers to move forward to EVs, this is very important,” GM CEO Mary Barra told Bloomberg Television on Dec. 1. “We think that it will be helpful and allow us to continue to invest in the U.S.”
The Inflation Reduction Act also gives some protection to the large investments car manufacturers have made to develop electric vehicles. It encourages them to plow ahead.
AutoForecast Solutions estimates that by 2025, automakers will globally produce 18 million to 19 million electric vehicles, with sales of 15 million, which means that supply will be greater than demand.