Already battling with slowing demand, electric vehicle makers are facing a new challenge in 2024. Several EVs, including Tesla’s (NASDAQ:TSLA) Cybertruck, General Motors’ (NYSE:GM) new EVs like the Chevrolet Blazer and Cadillac Lyriq, and Ford’s (NYSE:F) Mustang Mach-E, do not qualify for the $7,500 tax credit. The change comes after new battery-sourcing rules took effect on January 1.
As per the new regulation, EVs with internationally sourced components are deemed ineligible for U.S. tax credits. With this move, the government aims to bolster domestic manufacturing and reduce dependence on China for EV battery components. Following the implementation, the number of electric vehicles eligible for U.S. tax credits plummeted from 43 to 19.
At the same time, falling battery production costs are expected to lower the costs of EVs. One of the reasons behind cheaper batteries is a decline in lithium prices, a critical component in many EV batteries. Furthermore, rising competition within the EV market could lead to price reductions in 2024. These factors, along with potential interest rate cuts by the Federal Reserve this year, are expected to make EVs more affordable for buyers in 2024, consequently boosting demand.
What are the Best EV Stocks to Buy?
Analysts are more bullish on the stocks of General Motors and Ford than Tesla. Both GM and F currently carry a Moderate Buy consensus rating, with analysts expecting upside potential in both stocks. Over the past year, shares of GM, F, and TSLA have gained about 8%, 16%, and 130%, respectively.
