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Prospective electric vehicle (EV) buyers who are anticipating a decrease in prices may find the following development noteworthy. According to the latest pricing and sales data from Kelley Blue Book, the average transaction price for EVs in May 2023 experienced a decline of 14 percent compared to the same period in the previous year.
Based on preliminary estimates, the average transaction price for a new EV in May 2023 was approximately $55,488, representing a slight increase of $158 from the previous month but a significant reduction of $9,370 compared to May 2022. It is worth noting that new EV prices reached their peak in June 2022 but have since dropped by over $5,800.
Michelle Krebs, an executive analyst at Cox Automotive, stated that EV sales in May saw an estimated increase of 4.7 percent compared to April and a substantial 44 percent increase year over year. This growth can potentially be attributed to a combination of tax credits and manufacturer incentives, which are likely encouraging sales.
The decline in the average transaction price of EVs can be attributed to various factors. One significant factor is the availability of financial incentives for buyers. Prospective buyers have the opportunity to qualify for up to $7,500 in federal clean vehicle credit, which helps reduce the overall cost. Additionally, there are potential state and local level incentives that further contribute to cost reduction. For example, California’s Clean Vehicle Rebate Project provides a $7,500 state credit to eligible buyers who fall within specific income thresholds. These incentives play a crucial role in making EVs more affordable and accessible to a wider range of consumers.
However, there was a notable increase in overall vehicle sales in May 2023 compared to the previous year, with a growth of 22 percent. This surge in sales can be attributed to higher inventory levels and a rise in auto manufacturers’ incentive spend, as stated in the KBB report. The report indicates that carmakers’ incentive spending accounted for 3.9 percent of the average transaction price, which is an increase of 1.4 percent compared to the same period in 2022.
Furthermore, a price competition instigated by Tesla has compelled other car manufacturers to lower their Manufacturer’s Suggested Retail Price (MSRP) in order to remain competitive in the electric vehicle market. Tesla has reduced prices multiple times in the past year, including a recent reduction of $5,000 in the MSRP of the Model S and Model X. This trend has influenced other automakers, such as Ford and several Chinese carmakers, to follow suit and adjust their prices accordingly.
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