Light-vehicle prices have trended down through the first quarter of this year, but the decline for EVs is much steeper than gasoline vehicles.
The average transaction price for an EV has fallen 7.5 percent from $60,791 in January to $56,214 in March, according to J.D. Power. In that same period, the average transaction price for internal combustion light vehicles dropped 2.5 percent to $45,274 from $46,412.
At the start of the year, consumers faced a 31 percent premium in the average transaction price to purchase an EV. That stands at 24 percent now, according to J.D. Power data.
EVs are no longer limited to luxury buyers, said Jessica Caldwell, executive director of insights at Edmunds.
“The number of people who will shop for and consider EVs will go up significantly with an expanded number of options, body styles and brands,” she said. “This is the first step towards what needs to happen for this emerging technology to hit the mainstream.”
Some EVs have reached price parity with comparable gasoline models. Chevrolet slashed the price of the 2023 Bolt EV by about $6,000. The Bolt’s starting price is $27,495, including shipping. J.D. Power expects the pricing slide to continue industrywide as new models spark competition in the EV market.
Tesla, the biggest EV seller in the U.S., cut prices in mid-January, just as its most popular vehicles became eligible for the $7,500 federal tax credit under the Inflation Reduction Act. Tesla has since made smaller price adjustments to the Model 3 sedan and Model Y crossover.
The base price of the Model 3 has fallen from $48,440 to $44,630 with shipping, while the base Model Y crossover sticker has fallen from $67,440 with shipping to $56,630. Registrations of both vehicles surged in January, according to Experian.
State tax credits also are a significant driver of EV interest. California has the highest EV adoption score in the country. Buyers there get $2,000 for a purchase or lease of an electric car and $4,500 for an electric truck, SUV or van. State-level EV incentives helped increase adoption in Oregon, Colorado, New York and New Jersey.
Declining prices and broader choice are contributing to rapid EV sales growth. J.D. Power expects three in four consumers to have a viable EV option by the end of 2026.
About 8.5 percent of new-vehicle sales and leases were EVs in the first two months of this year, a record high and almost double the share from a year ago, J.D. Power said.
New EV registrations surged 57 percent last year to 756,534, while the overall U.S. market fell 11 percent to 13.6 million light vehicles, according to Experian. EVs climbed to 5.6 percent of registrations from 3.1 percent a year earlier.
The research firm’s EV affordability index rose to 87 on a 100-point scale in February, driven mainly by Inflation Reduction Act incentives. It hovered around 82 late last year. Once it climbs to 100, EVs will have reached price parity with internal combustion vehicles.
In Northern California, EV demand is “insatiable,” said David Long, executive general manager of Hansel Auto Group, which has Ford, Lincoln, BMW, Subaru, Honda, Acura, Volkswagen and Toyota franchises.
Long’s group sells every EV the brands ship, and he also has pre-orders. Hansel has more EV shoppers than both used-car and gasoline-powered new-car shoppers combined, but the closing ratio for EV shoppers is lower than for gasoline-powered vehicle shoppers.
Long said that many customers are curious about EVs but aren’t ready to buy one.
Gasoline-powered car shoppers often know what they want when they come in to the showroom. With EVs, “there’s so many questions about charging and things that they really want to hear another human being tell them and show them,” Long said. “And I think that’s where the closing ratio gets eroded.”
Only one in 10 shoppers will buy an EV by the end of this year, J.D. Power said, despite the price drop and increase in inventory.
Long said that even with a lower closing ratio, EV shoppers still benefit Hansel’s long-term business.
“We’ve had to become really, really good at being able to provide customers with information,” he said. “The more we can communicate to our consumers, the more comfortable they will be [and] the easier it will be for them to make that decision to transition from ICE to EV.”
Laurence Iliff contributed to this report.
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