With the transportation sector accounting for 28 percent of U.S. greenhouse gas emissions, the electric vehicle (EV) revolution is an essential part of the fight against climate change. EVs have far lower greenhouse gas emissions than their gas-powered counterparts, even when accounting for their higher battery mineral needs. Beyond their climate benefits, here are five additional reasons why EVs are gaining momentum.
The electric vehicle revolution is an essential part of the fight against climate change.
1. EVs are growing in popularity, and prices are falling
Despite misleading headlines that might suggest otherwise, EV sales continue to increase, hitting record highs. By the end of November 2023, the United States had reached 1 million annual fully battery-powered vehicle sales for the first time, a year-over-year growth of 50.7 percent and an increase of 30.6 percent compared with November 2022 for all EVs, including plug-in hybrids. Overall, more than 1.4 million EVs were sold in 2023 in the United States, a new annual record, totaling 9.1 percent of new passenger vehicle sales that year. The rising adoption of EVs is propelled by a confluence of factors, including increasing model variety and consumer economics. EVs cost significantly less to fuel and maintain than gas-powered vehicles. On top of this, the average purchase price of new fully battery-powered EVs is expected to decline by nearly 25 percent over the next few years, from $40,300 in 2022 to about $30,800 by 2030.
2023 saw a particularly sharp drop in EV prices, with the cost of the Ford Mustang Mach-E, Kia EV6, and Tesla Model S falling from July 2022 to July 2023 by 32.1 percent, 32.7 percent, and 42.1 percent, respectively. In addition to falling upfront prices, EVs provide lifetime savings of up to $18,440 compared with gasoline-powered vehicles. Thanks to decreasing lithium prices and EV incentives through the Inflation Reduction Act, the falling price of EVs means they will cost about the same as gas-powered vehicles in the next two years—and some of them already do.
The rise in the popularity of EVs has even caused analysts to predict that oil consumption from the use of gas-powered vehicles will peak and then steadily decline worldwide by 2027, with consumption likely already having reached its peak in the United States and Canada.
5 EV tax credits are accelerating the EV transition
EV prices will continue to drop and options continue to expand thanks to investments from the Inflation Reduction Act that address the needs of manufacturers and consumers:
- Manufacturing: The Inflation Reduction Act’s 45X advanced manufacturing production tax credit provides an incentive worth 10 percent the cost of production for both battery minerals and electrode active materials, as well as $45 per kilowatt-hour for EV batteries. The Inflation Reduction Act also extended the 48C qualifying advanced energy project credit, an investment incentive that provides a tax credit of up to 30 percent for investments in clean industrial facilities, such as those that manufacture EVs and batteries.
- Sales: The Inflation Reduction Act provides three credits for consumers buying EVs: the 30D clean vehicle credit, the 45W commercial clean vehicle credit, and the 25E previously owned clean vehicle credit. The 30D and 45W credits provide up to $7,500 for the purchase or lease of an EV, while the 25E credit provides up to $4,000 for the purchase of a used EV. Both the 30D and 25E credits also feature price caps for eligible vehicles, incentivizing manufacturers to produce more affordable models.
2. EV manufacturing is revitalizing American industry
The EV and battery industries, jump-started by the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act, are driving an American manufacturing boom. Since the passage of the Inflation Reduction Act in August 2022, automakers and battery manufacturers have announced more than $92 billion in domestic investments in EV supply chains. This has translated to 38,635 new jobs in EV manufacturing and 102,229 new jobs in battery manufacturing. Thanks to the EV revolution, helped in large part by the IIJA and the Inflation Reduction Act, overall investment in U.S. industry was three times greater in 2023 than the yearly average from 2010 to 2020.
3. Most EVs bought in the United States are made in America
EVs rank highly across a variety of “American-made” metrics. In 2022, more than half of the 931,314 EVs sold in the United States were assembled in North America. Tesla leads in driving this trend, with 100 percent of its U.S.-sold vehicles assembled in the United States. Tesla’s Model Y, its highest-selling model in 2022, featured 60 percent North American parts by value. That’s higher than the bestselling Ford F-150 pickup truck, which is made of 50 percent North American parts by value. However, being made in America doesn’t guarantee high-quality jobs: Tesla has a negative record in this regard, with the National Labor Relations Board finding that Tesla has committed “unfair labor practices,” as well as separate allegations of workplace safety violations, highlighting the importance of the United Auto Workers’ renewed efforts to increase union membership across the auto sector.
A large and growing percentage of American EVs are powered by batteries manufactured in the United States. However, foreign supply chains invested in EV manufacturing much earlier than many American firms and thus continue to play a major role in global EV supply chains. IIJA and Inflation Reduction Act investments have started shifting this paradigm, however, with $34.81 billion invested to supplement existing battery manufacturing, such as General Motors’ Ultium Cells facility in Lordstown, Ohio. Domestic investments are expected to increase U.S. battery manufacturing capacity by nearly 20 times by 2030, relative to 2021. The incentives will further encourage the renaissance in domestic manufacturing, a boon not only to fighting climate change but also to ensuring good jobs for Americans.
4. The EV charger network is quickly growing
The number of EV chargers in the United States is increasing rapidly. As of the second quarter of 2023, there were more than 140,000 public Level 2 and fast-charging stations in the country, with an estimated 54,000 installed in 2022. Since 2021, the private sector has invested an estimated $21.5 billion in charger development and deployment, which is anticipated to lead to the installation of 800,000 chargers by 2030, meeting 70 percent of demand for Level 2 charging and more than 100 percent of demand for Level 3 fast charging in that year. The momentum is building, with large retail outlets such as Walmart and Target, as well as major travel centers such as Pilot, now committed to installing chargers at some or all of their locations.
The private sector’s major investments in chargers get a further boost from the IIJA and the Inflation Reduction Act. The IIJA will invest $7.5 billion in charger deployment through the National Electric Vehicle Infrastructure Program and the Charging and Fueling Infrastructure Grant Program, while the Inflation Reduction Act increased the 30C alternative fuel vehicle credit maximum to $100,000 per EV charger for businesses, provided the charger is in a low-income or rural census tract.
5. Automakers have what they need to complete the transition to EVs
With skyrocketing profits and expanding domestic manufacturing, U.S. automakers have everything they need to help the country switch from fossil fuel-powered vehicles to electric. In addition to the array of federal incentives described above, many of the minerals used in making EV batteries are now more available to manufacturers than ever before.
One of the most important minerals for EVs is lithium. Global supplies of lithium have increased to such a degree that prices have been falling and are expected to continue to decline. New sources of lithium within the United States also continue to show promise; federal, state, and local governments should require the mining industry to act in a responsible manner that protects the environment, communities, and the sovereign rights of Tribal governments and people.
Because lithium is used to make batteries, higher availability and lower costs for this mineral mean lower costs for batteries—and therefore EVs. The prices of other battery minerals, such as nickel and cobalt, have also fallen substantially over the course of 2023, further contributing to decreased battery costs. With lower costs for batteries, U.S. automakers have yet another reason to fully embrace the clean energy future.
EV tax credits incentivize using domestically processed battery materials
The Inflation Reduction Act and the IIJA provided numerous incentives promoting responsible, domestic supply of battery minerals for an EV transition that does not depend on China. The Inflation Reduction Act’s 45X production tax credit provides an incentive of 10 percent the cost of domestic production for battery minerals, while the IIJA set aside $9.95 billion in grants to support domestic battery minerals research, development, and recycling.
Fears of a debilitating shortage of domestically processed battery minerals raised by automakers do not appear well-founded in the current market, and Inflation Reduction Act incentives will continue to steer more of the supply chain from international sources such as China. These clean technology incentives have helped nearly double investment in domestic battery minerals processing and manufacturing within one year, from $340 million in the second quarter of 2022 to $600 million in the same period of 2023.
The EV revolution is quickly gaining speed, with more than 1 million domestic EV sales achieved in 2023 and more than a dozen new large-scale manufacturing facilities under construction in the United States. These changes are the direct result of legislation passed in 2021 and 2022. Combined, the Inflation Reduction Act and the IIJA contain more than 12 policy incentives propelling the country toward a leadership position in clean technology development and manufacturing. Not only does this bode well for the fight against climate change, but it is also a testament to American innovation and a decisive step toward a sustainable and prosperous future.