New vehicle sales in the U.S. rose 5.1% from January to March as buyers remained in the market despite high interest rates. But EV sales growth slowed during the first three months of the year, with mainstream buyers wary of limited range and lack of charging stations.
Automakers, most of which reported U.S. sales data on Tuesday, sold nearly 3.8 million vehicles in the first quarter compared with a year ago, for an annual rate of 15.4 million sales.
With inventory on dealer lots growing toward pre-pandemic levels, auto companies have been forced to reduce prices. J.D. Power said the average selling price for March was $44,186, down 3.6% from a year ago and the largest decline on record for the month of March.
The company said March auto rebates were two-thirds higher than a year ago, about $2,800. This includes increased availability of leases. J.D. Power expects leases to account for nearly a quarter of retail sales last month, up from 19.6% in March last year.
EV sales grew just 3.3% to nearly 270,000 during the quarter, well below the 47% growth that fueled record sales and 7.6% market share last year. The slowdown, led by Tesla, confirms automakers’ fears that they have moved too quickly to pursue electric vehicle buyers. The share of electric vehicles in total U.S. sales fell to 7.15% in the first quarter.
Nearly all early adopters and people concerned about the impact of internal combustion engines on the planet have bought electric vehicles, and now automakers are facing more skeptical mainstream buyers, said Ivan Drury, director of insights at Edmunds.
“This is where all the headwinds that we saw in the survey data come into play,” Drury said. “Those real-world concerns about charging infrastructure, battery life, insurance costs.”
Jonathan Smoke, chief economist at Cox Automotive, warned that it appears the industry has already reached peak spring sales as buyers expect the Federal Reserve to cut interest rates later in the year.
“Interest rates are still near 24-year highs, and consumers simply lack the urgency to buy, with the expectation that rates will be lower by the end of the year,” he wrote in a report from market. Auto interest rates still average around 7% per year.
Drury said more affordable vehicles sell faster than more expensive ones. Sales of many large, expensive SUVs fell during the quarter as companies faced more frugal shoppers.
“Small sales, whether it’s size or sales price,” Drury said.
For example, General Motors’ Chevrolet brand sold 37,588 Trax small SUVs in the quarter, more than five times more than a year ago. By itself, the Trax, which starts at about $21,500, has outsold the entire Cadillac brand.
Most automakers reported strong year-over-year sales increases from January to March, but General Motors, Stellantis, Kia and Tesla all reported declines.
GM, the best-selling automaker in the United States, reported that sales fell 1.5% in the quarter, while Stellantis sales fell nearly 10%. Kia sales fell 2.5%. All three companies reported strong sales in the first quarter a year ago.
Toyota reported a strong sales increase of 20% for the quarter and said combined sales of its hybrid and electric vehicles rose 36%. Honda said its sales rose 17 percent, while Nissan and Subaru both posted a 7 percent increase. Hyundai recorded an increase of just 0.2%.
Tesla’s global sales fell nearly 9%, which the company attributed to factory changes to build an updated Model 3, shipment delays in the Red Sea and an attack that knocked out electricity at its factory in Germany. Motorintelligence.com estimated that Tesla’s U.S. sales fell more than 13% in the first quarter.