The electric vehicle (EV) market is experiencing a significant shift, with the average price of new EVs dropping below that of Tesla for the first time in nearly 18 months. Dealers are responding by cutting prices on used EVs and offering incentives on new ones, with the average discount on an EV being 12.4% of the average transaction price in May. This trend is a result of the industry catching up with Tesla’s price cuts, according to reports from Cox Automotive.
**Industrywide Average Prices Falling in Comparison to Tesla**
The average EV transaction price across all brands, including Tesla, was $55,235 in April, which was $433 less than Tesla’s average. By May, the industrywide average for EV transaction prices had dropped even further to $56,648, which was $721 less than Tesla’s average. This marks a shift in the market dynamics, with Tesla cutting prices multiple times over the past year, and other automakers now following suit.
**Volatility in EV Prices**
EV prices have been volatile over the past six months, with fluctuations ranging from $53,000 in March to nearly $57,000 in May. The gap between industrywide average prices and Tesla’s prices has also narrowed significantly, with the overall average price of an EV being $7,276 higher than Tesla’s average in December, but disappearing by May.
**Reasons for Price Drops and Discounts**
The drop in EV prices and the increase in discounts may be a response to consumer concerns over the cost of new EVs. A J.D. Power study published in May highlighted that worries about new EV costs have led to a decline in consumer consideration. Additionally, the availability of affordable EV models and changes to federal EV tax credit rules have impacted the market dynamics.
**Rise in Sales of Used EVs**
In response to the shifting market dynamics, there has been an 84% surge in sales of used EVs in May. The narrowing price gap between used EVs and gasoline cars, as well as lower used EV prices below internal-combustion prices, has contributed to this increase in sales. Lower used EV prices could also put pressure on automakers to offer discounts on new EV models.
**Implications for the Future of the EV Market**
Overall, the current trends in the EV market suggest a shift towards more affordable EV options and increased competition among automakers to attract consumers. The decrease in EV prices and rise in sales of used EVs indicate a changing landscape that may benefit consumers looking to enter the EV market. With the industrywide average prices falling in comparison to Tesla and dealers offering discounts and incentives, it will be interesting to see how the EV market evolves in the coming months.