The median price for new electric vehicles continues to fall, according to a recent report, reflecting increased production and inventory of EVs and changes in federal incentives.
The average transaction price for an EV last month was $55,488, down from nearly $65,000 in May of last year, according to a recent report from automotive data company Kelley Blue Book. The overall average transaction price for all vehicles sold in May was $48,528.
“Electric vehicles are still a luxury purchase for most people,” said Brian Moody, executive editor for Kelley Blue Book.
Automakers are rapidly electrifying their fleets amid a ramp up in federal incentives for both manufacturing and for buyers of new EVs. The Biden administration is pushing electrification to reduce greenhouse gases as EVs do not produce tailpipe emissions once on the road.
Georgia, meanwhile, has wooed multibillion-dollar factories from Hyundai Motor Group and EV upstart Rivian, with both set to start production in the Peach State in the next few years.
Credit: Stephen B. Morton for the AJC
Credit: Stephen B. Morton for the AJC
Nationwide prices for EVs peaked in June 2022 at $66,997.
One potential cause for the year-to-year decrease is that industry-leader Tesla cut prices on certain models starting in January, Moody said. Other factors such as options for shorter-range batteries and models with fewer luxury options could also contribute to the drop, he said.
As prices have fallen, new EV sales increased. Sales estimates in May are up 4% from April, and the year-to-year sales increase is 44%, according to Kelley Blue Book’s estimates.
The Democrats’ signature climate and health bill, known as the Inflation Reduction Act, altered eligibility for long-standing federal tax credits of up to $7,500 for buyers of new plug-in vehicles.
To fully qualify, vehicles and their batteries must be assembled in North America, when previously, vehicles made overseas also qualified. The law also removed caps on the total number of EVs made by automakers.
Pickups, SUVs and vans must be priced less than $80,000 and all other vehicles must cost less than $55,000 to qualify and the car buyer cannot make more than $150,000 a year.
The changes meant some Tesla and GM vehicles once again qualified for credits, while vehicles made overseas no longer do.
Hyundai Motor Group, which produces Hyundai, Kia and Genesis EVs, lost federal tax credits for EVs it makes overseas and is racing to finish its coastal Georgia plant to so its vehicles can again qualify for the tax credits.
Rivian currently builds its vehicles in a plant in Illinois. Though they’re U.S.-made, most of Rivian’s R1T trucks and R1S SUVs also no longer qualify for the credits because sale prices for many are greater than the $80,000 price cap in the IRA. But Rivian vehicles in the company’s planned R2 line of crossovers, which will be built at the planned Georgia plant, are expected to qualify.
“Our planned Georgia facility will be where we build our next consumer vehicle line, the R2, which will provide a great way for prospective owners to get the Rivian EV experience at a lower price point,” said Peebles Squire, a Rivian spokesperson.
Automotive manufacturers industry wide are also offering more incentives to buyers. Incentives reached the highest point in a year this May, with manufacturers averaging nearly $2,000 in incentives. An example of a manufacturer incentive could be an option for cash back on purchases of specific models.
The trend is not unique to EVs.
“The majority of luxury brands have higher inventory levels than the current industry average, along with all the domestic non-luxury brands. As supply continues to increase, industry average incentives will keep increasing,” said Rebecca Rydzewski in a recent Cox Automotive report on the Kelley Blue Book data. Rydzewski is the research manager of Economic and Industry Insights for Cox Automotive. Kelley Blue Book and Cox Automotive are owned by Cox Enterprises, which also owns the Atlanta Journal-Constitution. Cox also holds about a 4% stake in Rivian.
The average paid EV price in May sits in-between the average costs of luxury ($64,396) and non-luxury ($44,960) vehicles, based on Kelley Blue Book’s designations.
EV prices have implications for climate solutions, because electric vehicles are a focus for reducing greenhouse gas emissions. Transportation made up 29% of human-involved U.S. emissions in 2021, according to data from the United States Environmental Protection Agency. Of that percentage, over three-fourths came from light-duty vehicles and trucks.
“For lighter-duty applications, I think far and away it’s a slam dunk that we have to electrify,” said Timothy Lieuwen, executive director of Georgia Tech’s Strategic Energy Institute. “It’s going to be the biggest lever in putting a dent in our carbon dioxide emissions.”
Industry experts such as Moody and Lieuwen expect these trends in price and sales to continue, although the rate of growth is uncertain. Transaction prices may continue to drop as technology improves and sells increase, Moody said, because manufacturers won’t have to make as much profit per vehicle.
The trend may need to continue for EVs to become more widely used.
“There’s no doubt that prices are going to need to come down,” Lieuwen said.
