The electric vehicle (EV) market has become increasingly attractive to potential buyers, thanks to significant price reductions. In January, the average price of a new EV in the US was $55,353, showing a substantial drop of 10.8% compared to the same month in 2023. Although this figure represents a marked decrease, it is still 3.2% higher than December 2023, which saw the lowest average price for an electric car in the past year.
Experts attribute this decline primarily to Tesla’s concerted effort in reducing prices. Mark Strand, a senior director at Cox Automotive, the parent company of Kelley Blue Book, stated that “EV prices have come down significantly in the US in the past year, led by price cuts at Tesla.”
Interestingly, the decreasing trend in prices for EVs aligns with the overall decline in the average price of new vehicles in the US. In January, this figure dropped to $47,401, a decrease of 2.6% compared to December 2023 and 3.5% when compared to January 2023.
While prices for various EV models have seen reductions, Tesla’s Model Y has witnessed a particularly noteworthy drop. As the industry’s EV volume leader, its prices have fallen by approximately 21% over the past year. In January, the Model Y was available for less than $50,000, significantly lower than its price of nearly $63,000 in January 2023.
Moreover, Tesla’s CEO Elon Musk recently shared an exciting development on his platform X, formerly known as Twitter. He announced a fresh $1,000 discount on Tesla Model Ys purchased in February and dubbed it an “essential quandary” of manufacturing. Despite this offer attracting potential buyers, concerns have arisen among investors regarding the sustained price cuts at Tesla. The company’s issued guidance for 2024 was criticized for being overly vague, warning that its growth may slow down this year. As a result, Tesla’s stock has declined by 26% since the beginning of the year, in contrast to the S&P 500 index, which has yielded gains of approximately 3%.
Additionally, Kelley Blue Book highlights another consequence of the high EV inventory and slowing sales—increased discounts on specific EV models. For example, Volkswagen’s ID.4 electric SUV previously had average incentives amounting to approximately 6% of its average transaction price. However, last month saw a significant jump in incentives, reaching nearly 17% of the average transaction price.
In conclusion, the declining prices in the US EV market offer an enticing opportunity for those seeking a new electric vehicle, with Tesla models displaying substantial reductions. As competition grows and incentives increase, consumers can potentially find even better deals on a range of EVs.