Is Now a Good Time to Buy an EV?
Throughout 2023, auto manufacturers’ supply chains eased and inventories increased, resulting in lower prices for electric cars compared to 2022, according to Kelley Blue Book, a division of Cox Automotive. In September 2023, the average price of an electric vehicle was $50,683 in the U.S., down about $2,000 from August 2023 – and down from more than $65,000 just a year ago, and a 23 percent price reduction in just one year!
Moreover, the September 2023 average EV price was less than $2,000 more than the average transaction price of all new vehicles, meaning EVs have essentially reached price parity with gasoline cars. And that’s before factoring in significantly lower running costs; EVs typically cost far less to fuel and maintain over their lifetime.
Tesla Price Drops While Market Share Decreases
Not surprisingly, the drop in EV prices was led by Tesla, which currently accounts for about half of the new electric car market. Throughout 2023, Tesla ramped up production in the U.S., and simultaneously cut prices on the popular Model Y sedan and Model 3 SUV. Both vehicles, eligible for the federal $7,500 tax incentive, were among the most popular in the U.S., and when the rebate is factored in, both can be had in well-equipped form for under $45,000 – less than the average price of a new vehicle – gas or electric.
Tesla’s continued success is only part of the story, however. Despite increased volumes, Tesla’s market share has dropped to 50 percent of the new-EV market in the U.S. While that still makes them the dominant player, it’s a massive decrease from a year ago, when they controlled almost 70 percent of new electric car sales. Legacy manufacturers like Hyundai, Mercedes-Benz, Kia, Ford, General Motors, and others, are quickly ramping up EV production and sales, and the choices for new EVs are better than ever.
EV Incentives Increase to Almost $5,000
Indeed, there’s now enough volume in new EVs that manufacturers are starting to offer incentives on new vehicles. In September of 2023, Kelley Blue Book reports that available incentives totaled 9.8 percent of the average transaction price of a new electric car – equating to an average discount of $4,991. Days supply of electric vehicles, a marker of how many are available on dealer lots, was at 97 days at the end of September. That’s down from peak EV inventory levels of 111 days during early July, but significantly more days supply than the average internal combustion car, at about 52 days. That should mean more aggressive incentives on EVs than gasoline vehicles.
“EV sales continue to grow in the U.S., partly due to strong supply and more choice,” said Stephanie Valdez-Streaty, Cox Automotive’s director of industry insights. “At last check, we had 15 new EV models for sale that were not available a year earlier. Better choices and more options are helping push prices lower and drive higher sales.”
Electric Cars: Good News for All Car Buyers
If you’re not looking for an electric car yet, the news is also good. Whether you’re looking at gasoline, hybrid, plug-in hybrid, or EV, the overall average price of a new vehicle in September 2023 dropped by 3.4 percent compared to January, as higher inventories pushed transaction prices lower. The average transaction price of new vehicles was $47,899, about the same as a year ago, and a drop from the peak of nearly $50,000 at the start of 2023.
Luxury car prices saw the biggest drop – decreasing almost $900 in September 2023 compared to August 2023, and down over 6 percent compared to the same time last year. Once again, EVs had a major influence, as Kelley Blue Book categorizes Tesla as a luxury brand; the EV-only brand’s prices were down a massive 24.7 percent year over year. Model 3 prices dropped 26 percent to $41,484, well below average luxury car prices and lower than the average Acura, Lexus, Infiniti, or Volvo.