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, the average price Americans paid for a new EV was $53,633. In August, the price fell by $257 to $53,376. That's a remarkable 18.7% lower than the average transaction price of $65,688 in August a year ago. 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, said Cox Automotive Chief Economist Jonathan Smoke. The dealers are reportedly feeling pressure from oversupply concerns rather than 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 not on a particularly steep curve. It’s a “natural speed bump and an expected part of growth,” wrote Smoke.
The economist forecasted 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 U.S. in the first seven months of 2023, and it is enjoying a nearly 60% EV market share. Chevrolet is second with a 6% market share followed by Ford at 5.2%.
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, 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.
In fact, the average transaction price of a Tesla has declined by 19.5% over the last 12 months, falling from $68,233 a year ago to $54,943 in August.
Meanwhile, hybrid and alternative fuel vehicles have witnessed a contrasting trend. The average price of a hybrid car increased by 18.1%, from $33,555 in August 2022 to $39,624 in August 2023. Despite that, hybrids continue to be considerably more affordable than pure EVs.