Ford Mach-E Sales Fall 45%. The Reasons: High Prices, Incentive Confusion.

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Electric-vehicle sales at

Ford Motor

dipped to start the new year, showing how confused car buyers are about new tax incentives and how unwilling they are to pay high prices.

Ford (ticker: F) sold 5,247 electric vehicles in the U.S. in January compared with 7,823 in December.

F-150 Lightning sales were 2,264 in January, down 4% from December’s 2,359. Mustang Mach-E sales came in at 2,626, off 45% from the 4,775 SUVs in December. Ford also sold 357 E-transit vans.

The Mach-E drop demonstrates how government incentives can influence buyer behavior.

The Inflation Reduction Act, enacted last summer, gives a $7,500 purchase tax credit to buyers of qualifying EVs. The Internal Revenue Service, the Treasury Department subsidiary that implements the law, considered the Mach-E to be a sedan—not an SUV, putting the maximum qualifying price for a Mach-E at $55,000.

Coming into this year, Ford had several Mach-E trims that were more expensive than $55,000. The company cut prices for the electric Mustang on Monday, hoping to boost demand and have more trim levels qualify for the tax credit. Now, the vehicle starts at just shy of $46,000.

The incentive price cap for trucks is $80,000; the Lightning starts at about $55,000.

The

Tesla

(TSLA) Model Y was in the same boat as the Mach-E, which led CEO Elon Musk to cut U.S. prices for the Y on Jan. 12.

Tesla

‘s cut might have been a factor in Ford’s decision to lower prices as well.

The IRS , in a surprise move, reversed course on Friday, moving the price cap for the Mach-E and Model Y to $80,000, treating both vehicles like SUVs.

Investors didn’t react to the January EV sales dip on Thursday when Ford stock rose 3.8%, closing at $14.32.

Ford’s overall sales have helped. Ford sold 146,356 in the U.S. including 55,001 F-Series trucks. Those figures rose bout 2% and 9% from last year.

Ford stock was down down 5.7% on Friday. Shares were reacting to a weaker-than-expected fourth-quarter earnings report. Tesla stock was rising, up 4.1% at $196.06.

Write to Al Root at [email protected]