The consistently falling prices of electric vehicles over the past year could be an encouraging and worrying sign in equal measure. Largely influenced by Tesla’s price cuts, EV prices fell sharply month-over-month and year-over-year, according to Cox Automotive's latest data.
In July 2023, the average price Americans paid for a new EV was $53,633. In August 2023, the price fell by $257 to $53,376. That's a remarkable 18.7 percent lower than the average transaction price of $65,688 in August 2022. The effective prices could be even lower after factoring in federal and state incentives.
Franchised auto dealers have a diminishing outlook for EV sales in the short term, Cox Automotive’s chief economist Jonathan Smoke said. The dealers are reportedly feeling pressure from oversupply concerns rather than the lack of demand.
Tesla has a direct-to-consumer modus operandi, so the dealers’ declining expectations are concerning non-Tesla EVs, whose sales are growing but the growth curve isn’t particularly steep. It’s a “natural speed bump and an expected part of growth,” wrote Smoke.
The economist forecasted that surplus inventory and increased competition could lead to further reduction in prices, and will positively impact buyers considering EV adoption. Moreover, manufacturer incentives have also peaked over the last 12 months, now standing at $2,365, which can help boost EV adoption further.
Tesla’s impact on this trend is a truism. The brand witnessed 390,377 new registrations in the US in the first seven months of 2023, and it is enjoying a nearly 60 percent EV market share. Chevrolet is second with a 6.0 percent market share followed by Ford at 5.2 percent.
The Elon Musk-led brand has disrupted the EV space with multiple price cuts worldwide over the past 12 months. The latest cuts took effect in August 2023, with inventory discounts of up to $5,500 on the Model 3 Long Range, as the brand prepares to make room for its incoming facelifted version revealed early this month.
In fact, the average transaction price of a Tesla has declined by 19.5 percent over the last 12 months, falling from $68,233 a year ago to $54,943 in August 2023.
Meanwhile, hybrid and alternative fuel vehicles have witnessed a contrasting trend. The average price of a hybrid car increased by 18.1 percent, from $33,555 in August 2022 to $39,624 in August 2023. Despite that, hybrids continue to be considerably more affordable than pure EVs.
What's your outlook on EV prices and demand? Leave your thoughts in the comments.