Factory incentives keep EVs growing as automakers plan more affordable models

Electric vehicle makers kept the segment growing over the first half of the year with sky-high factory incentives, but will need to shift to more affordable models in the U.S. to draw mainstream buyers, analysts said.

For the January to June period, new EV registrations rose 7 percent to 579,687 vehicles compared with a 1.8 percent rise in the U.S. light-vehicle market to 7.8 million, S&P Global Mobility said. EV market share rose to 7.4 percent from 7.1 percent a year earlier.

The first-half data includes new battery-electric vehicles but not gasoline-electric hybrids.

The relatively modest increase in EV share despite strong incentives shows that automakers are still struggling to move from early adopters to mainstream buyers in the EV segment, said Ed Kim, chief analyst at AutoPacific.

"They have to compete on price because there just aren't many mainstream consumers that really care about going electric," Kim said. "You have to entice them with money, put cash on the hood to get their attention."

As more affordable electric models hit the U.S. market and charging infrastructure improves in coming years, a new wave of buyers will add EVs to their shopping list, said Kim. AutoPacific consumer surveys show that $35,000 is the price point where "EV rejectors" will consider an EV for their next purchase.

"The next real big battleground is going to be affordable EVs," Kim said. "In the next three years, there's a ton of them coming and a lot of automakers are really holding out for that."

Tesla, the EV market leader, is developing affordable models for next year, but hasn't given details. Ford has said it's working on a low-cost EV platform for multiple vehicles. Hyundai Motor Group has smaller crossovers coming and Stellantis has promised a $25,000 Jeep.

Luxury EV startups are also promising lower-cost models. Rivian and Lucid are both developing vehicles that will start below $50,000, excluding shipping fees, in 2026. Currently, both automakers offer vehicles just below $70,000 before shipping.

Both EV startups and legacy automakers are losing billions of dollars per year from selling EVs, a financial burden that only increases with lease deals, subsidized financing and price cuts.

While the growth rate for EV sales has slowed considerably from last year, the pool of consumers considering an EV is growing, said Elizabeth Krear, an analyst at J.D. Power.

In July, 28 percent of new-vehicle shoppers said they were very likely to consider an EV, the highest level J.D. Power has measured, Krear said.

U.S. EV deliveries grew 50 percent last year, according to J.D. Power, and are growing at about 11 percent this year. The J.D. Power estimates are for retail sales, while the S&P Global Mobility data includes retail and fleet. In calendar year 2023, EV registrations grew 52 percent, the data showed.

A major drag on EV sales this year has been the sudden decline of Tesla, the top EV maker by far with just over 50 percent of the segment from January to June.

Tesla's U.S. registrations fell 10 percent to 292,798 vehicles in the first half, the data showed. Its most affordable vehicle, the Model 3 sedan, saw its registrations fall by 48 percent after the base model lost access to the $7,500 federal tax credit because of battery sourcing rules.

Ford was second with 43,133 registrations in the first half, a 60 percent increase compared with a year earlier, the S&P Global Mobility data showed. Hyundai was third with 30,919 vehicles, a 50 percent jump. Kia was No. 4 with 28,668, more than double its registrations from a year earlier, and Rivian was fifth with 25,208 registrations, a 40 percent gain.