EV costs fall with price cuts, discounts, new models

The most notable part of Chevrolet's electric Equinox isn't a top trim level with a giant infotainment screen and hands-free driver-assist technology.

It's the upcoming bare-bones model, with a range of 319 miles, that consumers will be able to buy for less than $35,000 when it reaches dealerships this year.

The Chevy Equinox marks a stark departure from the not-so-distant electric vehicle launches of the past two years, when debuts such as the Ford F-150 Lightning and GMC Hummer EV pickup were priced near or above $100,000. The cost gap is narrowing between EVs and internal combustion engine vehicles because of more affordable options like the Equinox. But automakers still have work to do.

Affluent early adopters have led EV purchases over the past decade, said Ed Kim, chief analyst at automotive research firm AutoPacific. Most of today's prospective EV buyers are different.

"In order to keep EV adoption rates going, now we've got to get the truly mainstream — not affluent and not early-adopter — buyer into EVs," Kim said.

EV prices have steadily declined from 2022 through the first quarter of 2024 because of a flurry of price cuts from Tesla, new pricing strategies industrywide, model introductions and a changing pool of buyers, analysts and dealers say.

The average transaction price for an EV, excluding the federal tax credit, was $65,921 in 2022, according to J.D. Power. The price fell 4 percent to $63,187 in 2023 and dropped 9 percent in the first quarter of 2024 to $57,584, excluding the federal tax credit. The credit saved buyers $3,700 on average in the first quarter.

"Pricing has been coming down as we've seen more products come into the market," said Stewart Stropp, executive director of J.D. Power's EV practice. "We've seen competitive pricing come to the fore a lot more as the market matures a little bit, driven by Tesla."

Still, incentives and price cuts haven't made EVs a bargain compared with competing gasoline-powered vehicles. The average price of a gasoline-powered vehicle in the first quarter was about $9,000 less than the average price of an EV that qualified for the federal tax credit.

Even with high prices, most automakers are struggling to make EVs profitable, said Stephanie Brinley, associate director of AutoIntelligence at S&P Global Mobility.

"They're trying to make sure they charge as much as they can to get as close to the margins that they want, while at the same time trying to increase interest," Brinley said. "The fact that EVs are fundamentally more expensive than internal combustion engine vehicles is a strike against them."

EVs and hybrids make up around 20 percent of sales at Car Pros Automotive Group's single Hyundai store and five Kia dealerships across California and Washington.

"People are interested in EVs, but they're not particularly willing to pay more to drive an EV than an ICE vehicle," said Matthew Phillips, CEO of Car Pros, one of the largest private dealership groups in the country. The group also has BMW, Mini and Honda dealerships.

Phillips, who drives a Kia EV6, said initial high stickers are the way pricing goes with new technology. TVs are an example, he said. Flat-screen TVs were once expensive luxury products. Now, big-box stores sell large flat-screens for less than $200.

"With your early adopters, you're going to see people willing to spend a little bit more money on any product," Phillips said. "After the excitement has died down, the cars have to be competitive if they're going to sell."

The Hyundai Ioniq 5 and Ford Mustang Mach-E, both nonluxury brand models, have sticker prices that can easily surpass $50,000, depending on trim levels and performance variants, which is pushing into premium price points, Kim said. Getting nonluxury and low-income buyers into EVs is the challenge. "What we're seeing with all the price adjustments that are happening now are attempts to address that," he said.

The average transaction price of the Mustang Mach-E, excluding the federal tax credit, swung 30 percent in just one year, according to J.D. Power. The average price plunged from $60,200 in the first quarter of 2023 to $42,000 in the first quarter of 2024, the firm said. The average price of a Tesla Model Y in the same period fell from $63,400 to $57,300, a decline of 9.6 percent, J.D. Power said.

It's worth noting that Tesla made a significant price cut between the fourth quarter of 2022 and the first quarter of 2023, when the Model Y's price fell 11 percent from $71,200 to $63,400. This was the nameplate's largest quarter-to-quarter price cut, according to J.D. Power. Ford then promptly responded with price cuts to the Mustang Mach-E.

To be sure, automakers' price cuts are getting their EVs closer to many consumers' budgets.

In an AutoPacific study released in April, consumers in the market for a new vehicle within the next three years were asked if they would be interested in an EV. More than 40 percent of respondents said they were not, mostly because the vehicles are too expensive. But nearly half said a price under $35,000 would entice them.

Automakers may be taking note.

In May, Volkswagen of America said it delayed the ID7 electric sedan's launch in the U.S. and Canada for an unspecified period. Dealers who spoke with Automotive News anticipated ID7 pricing could exceed $60,000, which would make the Passat-size vehicle a tough sell.

Consumers are more open to lower-priced EVs, such as the Honda Prologue, which went on sale in March. The Prologue starts at $41,295 including shipping and the federal tax credit.

"There's been a lot of people who are interested in an EV that have been standing on the sidelines specifically waiting for Honda," Phillips said of the Prologue. "Right now, we're seeing pretty strong demand. What that looks like in 60 or 90 days is anybody's guess."