Electric vehicles are selling slowly so far in 2024, disappointing automakers that were betting on a faster pace of adoption.
In response, manufacturers like Ford are cutting sticker prices on electric vehicles by thousands of dollars, and the industry is offering big incentives to try to attract more buyers.
In the first quarter of the year, electric vehicles accounted for a 7.3% share of all new car sales in the U.S., down from the previous quarter’s 8.1% share, according to Kelley data Blue Book. It was the first time since 2020 that EV sales fell quarter-over-quarter.
“Until electric cars can compete with gasoline models on price, they will continue to sell at a slow pace and in small volumes,” said Karl Brauer, executive analyst at iSeeCars, in a report this week.
According to a recent survey conducted by Edmunds, current electric vehicle offerings do not meet the needs of all car buyers who would potentially drive an electric model.
“There are considerable gaps between what consumers believe are critical considerations for purchasing electric vehicles – namely price, brand trust, body type and range – and the actual vehicles available for purchase,” he wrote in a report Jessica Caldwell, insights manager at Edmunds. .
For example, nearly half of the “electric vehicle connoisseurs” surveyed want to pay less than $40,000, but only four models have average transaction prices below that amount.
Electric vehicle prices are falling as inventories rise
Data from Kelley Blue Book shows that electric vehicle prices are falling, largely due to limited demand among buyers and abnormally high inventory levels, even though at the same time many electric vehicles are eligible for tax credits of $7,500.
The average price of a new electric vehicle was $55,167 in the first quarter, down 3.8% from the previous quarter and 9% from a year ago.
Even with EV prices declining, these cars continue to sell for much higher prices than the average for all vehicles, which was about $47,200 in February. For many car buyers, the convenience of being able to fill up with gas in minutes outweighs the benefits of driving electric vehicles.
Data from car shopping app CoPilot shows that electric vehicle prices fell by an average of $302 in March due to “decreased consumer willingness to address the logistical challenges associated with electric vehicle ownership.” Prices plummeted for the Hyundai Ioniq 5 (down $2,119) and the Volkswagen ID.4 (down $1,825).
While some automakers have scaled back electric vehicle production in recent months, dealers still had a massive 114-day supply of electric vehicles in mid-March, according to Cox Automotive. (This is the amount of time it takes to sell through current inventory at the current sales rate.) For reference, a 60 or 70 day supply is generally considered normal by industry standards.
For Tesla, which uses a direct-to-consumer model, higher inventory levels pose unique challenges as their “strategy leaves all risk of managing inventory and its fluctuations on the company’s books,” according to a new analysis by Bank of America. Their research says Tesla may be forced to reduce production in 2024 due to the slow pace of electric vehicle sales.
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