Potential electric car buyers waiting for prices to drop might want to glance at this new development. The average transaction price for EVs was down 14 percent in May 2023, compared to the same period last year, according to the latest pricing and sales data compiled by Kelley Blue Book.

The preliminary estimate for the average transaction price of a new electric vehicle in May 2023 was $55,488, just about $158 more than the month before, but a remarkable $9,370 less than May 2022. New EV prices reportedly peaked in June 2022, but have fallen by more than $5,800 since.

Michelle Krebs, executive analyst at Cox Automotive said, “EV sales in May are estimated to have increased by 4.7 percent compared to April and are up 44 percent year over year. This may be due to a combination of tax credits and manufacturer incentives that are encouraging sales.”

The overall drop in average transaction price for EVs can be attributed to multiple factors. Buyers can qualify for up to $7,500 in the federal clean vehicle credit, and possibly qualify for several state and local level incentives to bring the costs further down. For instance, California’s Clean Vehicle Rebate Project offers buyers under certain income thresholds, a $7,500 state credit.

That said, overall vehicle sales were up by 22 percent in May 2023 year over year, possibly due to higher inventory levels, and an increase in auto manufacturers’ incentive spend, according to the KBB report. Carmakers’ incentive spending rose to 3.9 percent of the average transaction price, 1.4 percent more than in the same period in 2022.

Additionally, the price war triggered by Tesla has prompted several other carmakers to cut their MSRP to continue selling electric cars at competitive rates. Tesla cut prices several times in the past year – the most recent cut saw a $5,000 drop in the MSRP of the Model S and Model X. Even the likes of Ford and several Chinese carmakers have followed suit.

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