Electric vehicles have come a long way from the niche product of yesteryear to the game-changing technology of the future. One thing that hasn’t changed, however, is consistently higher prices than internal combustion engine (ICE) cars. With many EVs carrying thousands of dollars more on the price tag, many drivers have hesitated or simply been unable to make the switch to a cleaner vehicle.
That trend is showing signs of change now, however, as a series of EV price cuts align to shake things up in the EV world. Let’s explore what those factors are, and why they could mean you could pay less for a new EV in the near future, in the following article.
In late 2022, the first of a series of EV price cuts from leading EV manufacturer Tesla started a ripple effect in US electric vehicle sales. Before getting into why, it’s important to understand how prices are usually determined for new cars, electric or ICE.
When a new car is about to be released to dealers, the manufacturer sets a basic price, called the Manufacturer Suggested Retail Price (MSRP), based on the vehicle’s cost without optional features. Dealers can then offer incentives to buyers to boost sales while considering any extras to arrive at the sticker price you see on the lot.
In recent years, dealers have tended to sell above the MSRP, particularly when it comes to harder-to-find vehicles like EVs. That brings us back to price cuts. Until recently, much of what kept the cost of new EVs high was scarcity – in other words, demand exceeded supply.
Banking on that trend, as well as new federal incentives for manufacturers and dealers and a growing public interest in eco-friendly transportation, EV manufacturers have, in the last few years, started turning out more and more new EVs, inflating the supply even as economic uncertainty has left a lot of buyers without the cash to purchase new cars.
That’s it in a nutshell, but there are several other factors at play. Read on to learn more.
According to recent data, the industry-wide EV inventory had climbed to over 92,000 as of mid-2023. That’s nearly five times the amount on dealership lots in the second quarter of 2022, and it’s clear evidence that automakers are taking the switch to EVs seriously.
Unfortunately, it also means that, with the average EV price around $53,500, many of these new vehicles are beyond the means of lots of drivers. With stock to move and more hesitant buyers, manufacturers and dealers are forced to cut prices to maintain sales.
A decade ago, EV manufacturers were few and far between, and it was difficult to find EVs for sale in many parts of the country. That’s changing now, as established manufacturers like Tesla and Polestar are joined by major automakers like GM, Hyundai, and BMW.
As traditional car makers move into the EV market, manufacturers are having to face stiffer competition as they work to attract buyers. In the United States, Tesla and Ford have made headlines with an ongoing price war compounded by their growing inventories. On top of that, since so many car companies have invested so heavily in the EV market, they need to boost and maintain sales to recoup that investment.
The result? An almost unheard-of trend towards slashing MSRPs as manufacturers adapt to what’s effectively the earliest stage of a mass market for EVs.
A key factor behind the spread of EVs over the last few years has been a series of federal, and sometimes state, tax incentives designed to boost sales and ease the cost of purchasing for drivers.
In 2023, the latest of these incentives arrived with the passage of the Inflation Reduction Act (IRA). Under these new rules, buyers of EVs that meet certain conditions could knock up to $7,500 off the price through a tax write-off, or smaller amounts in the form of dealership rebates.
The tricky part for American EV-makers was that qualifying vehicles:
That last one has been a particularly strong incentive to cut EV costs, as manufacturers depress prices to make them eligible for tax credits. Even vehicles that don’t qualify, such as imported EVs, could start coming with smaller prices as importers and dealers look for ways to make their products competitive in the US market.
At the moment, no one is quite sure where the US EV market will end up. But as prices continue to fall, you may want to hold off on buying a new EV until you can get the best deals. Until then, keep up to date on all the latest news from the EV world when you follow evee life.
Published October 12, 2023 6:19PM
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