There is some good news for car buyers as automakers shift production focus to electric vehicles: Those cars may soon be a lot more affordable.
New production credits in the U.S. could slash the cost of making batteries by up to 50%, Car and Driver reports.
The Inflation Reduction Act, a sweeping federal law signed by President Joe Biden in August 2022, includes some provisions designed to attract cell and battery manufacturers to the U.S. and North America. The incentives dangled to sweeten the pot for those companies could also dramatically decrease costs for electric vehicle buyers stateside.
“Called Section 45X, it funds 10 years of production credits for manufacturing battery cells, photovoltaic solar cells, and components for wind energy,” John Voelcker writes for Car and Driver. The provisions “in one fell swoop will cut one-third to one-half off the total cost of any EV battery with both cells and pack built in the U.S.,” Voelcker added.
This could encourage carmakers assembling vehicles in the U.S. to build their own battery factories or design and build their own cells, which could reduce or eliminate profits for a third-party cell maker. The funding may lead to a surge in battery manufacturing in North America, boosting the EV industry and reducing the reliance on imports.
The move is meant to boost the shift to electric vehicles, which is already being embraced by some major carmakers and given a big push by regulators in certain states.
California, for example, will ban the sale of new, gas-powered cars by 2035 under a new rule recently issued by the state’s Air Resources Board. That follows an executive order from Gov. Gavin Newsom, setting 2035 as a target to end the sale of new internal combustion engine cars.
One battery expert told Car and Driver that he predicts all carmakers assembling vehicles in the U.S. will ultimately opt to build their own battery factories in the country, either alone or in collaboration with an existing battery manufacturer.
Of course, whether automakers ultimately pass the new cost savings on to car buyers remains to be seen. Some may very well opt to use the increased margins to line their pockets unless forced by competitive factors to trim price tags.
“If most EV models built in the U.S. today break even at best, undoubtedly battery makers will want to increase their margins—making it easier to build new plants and boost volume,” Voelcker writes. “At the same time, car companies may use some of the reduction in battery cost to boost EV profits to the same level as those on gasoline vehicles.”
Talk with a California Lemon Law Attorney
Whether it is powered by electricity or gas, carmakers continue to struggle to ensure that their vehicles are actually safe to drive.
If you have been stuck with a defective or malfunctioning vehicle, a California lemon law attorney at Bickel Sannipoli APC can help you fight back. That includes forcing the manufacturer to buy back or replace the car.