There are currently 57 electric vehicle models on sale in the U.S., and while Tesla is still the most popular, new players in the electric car market are driving competition and prices keep dropping. EV sales are still growing, though that rate of growth has slowed dramatically over the last year or so. The enthusiastic early adopters have already bought in, and the market hasn’t been very successful at courting traditional gas car buyers. Without a robust infrastructure and mediocre consumer education, EV sales are lagging behind projections, which is also driving pricing down. According to data from Cox Automotive, the price premium for an EV over their gasoline counterparts has shrunk to less than $5,000. That’s down from a $17,000 price gap in 2022.
With increased competition segment leader Tesla has resorted to dramatic price cuts in an attempt to keep market share. Tesla’s popular Model 3 sedan fell in price from $47,000 in early 2023 to just $38,990 today. A Model Y Performance fell from seventy grand last year to just $52,500 right now. If you think that’s dramatic, the price drop of the company’s more expensive Model S and Model X was over $40,000 year over year, in some cases. These precipitous price drops are also driving the competition to lower their prices.
In addition to the factory price cuts, dealers are starting to wheel and deal on electric car inventory that has sat around on the lot for a few months. Average EV prices dropped $2,000 in February alone! “We’re going to continue to see price cuts or discounts just because there’s inventory and [dealers are] really trying to get these sold,” said Stephanie Valdez Streaty, director of Industry Insights at Cox Automotive.
This price dropping trend isn’t going to end here, either. Expect EV prices to continue trending downward, to be less expensive than gasoline cars, maybe even within the year. There are a number of factors that could make this happen in the short term. If Chinese automakers figure out a way to get their less expensive EVs into the U.S. market, you’ll see a dramatic price shift almost immediately. Further, the price of batteries is continuing to fall as scale continues to ramp up. Batteries are nearly 90 percent less expensive than they were in the pre-mainstream-EV world of 2008.
And that’s just new cars. The price of used EVs is dropping like a stone as consumers prefer to buy new when dealing with a new technology.
Price is the biggest barrier to entry for most new car buyers. With the least expensive new EV on the market still the long-in-the-tooth base model Nissan Leaf at $28,140, there’s still a long way to go for EVs to be competitive with entry-level gasoline cars.