2023 Toyota bZ4X AWD Limited.
Many car shoppers say the price of electric cars is a barrier to buying one.
Now, there are more deals available for buyers considering going electric.
In a good sign for the market, EVs saw substantial incentives last month.
Electric cars are seeing some of their best discounts yet.
EV incentives hit 9.8% of their average transaction price (ATP), or $4,991 off the price of the car, in September, according to Kelley Blue Book. It’s the first time EVs have been this highly discounted in four to five years (when there were much lower sales volumes), and it’s crucial for the cars, the price of which many blame as a barrier to adoption.
Just a year ago, EV incentives were less than 2% of ATP, Kelley Blue Book data says.
Prices averaged $50,683 last month, down significantly from more than $65,000 in a year ago. That makes EVs, on average, still more costly than the $47,899 ATP for a vehicle overall, but when taking into account the EV discounts, the two start to look pretty similar in pricing. Of course, $100,000-plus luxury EVs and $35,000 economy plug-ins each skew those numbers.
But as more automakers scale, more affordable products becomes available, and drivers make the switch, costs are generally dropping.
Interestingly, incentives for vehicles overall last month were only about 4.9% of ATP, according to Kelley Blue Book, or $2,368 — improving, but low compared with historic rates. For context, overall new car incentives were as high as 10.2% in September 2019, pre-pandemic.
These deals became hard to come by during the car supply-and-demand crunch throughout COVID when inventories were low and shoppers were paying over sticker price just to get a new ride. Now, these price cuts are slowly returning, just at much lower rates.
But EVs themselves are seeing incentives close to pre-COVID levels. In fact, second to high-end luxury cars, EVs saw the most deals of all vehicle segments last month.
Why incentives for EVs matter
Since much of the talk around EVs has involved their often-hefty cost, seeing prices drop in one way or another will be key to adoption. It’s this idea of price parity — or electrified cars costing about as much as their gas-run counterparts. So far, only high-end EVs are running the same as equivalent internal combustion engine cars; mainstream EVs aren’t quite there yet.
As one signal that prices will improve, EV inventory is building up on dealership lots, and that’s not necessarily a bad thing for EVs. To some extent, that’s a function of automakers stretching their manufacturing capacity and finally getting EVs off assembly lines en masse.
However, because dealers became comfortable during COVID operating with lean inventories on their lots, many aren’t so thrilled about EVs piling up, especially when much of the gas-car supply hasn’t yet recovered. There was 97 days’ supply of EVs at dealerships across the country at the start of October, compared with about 50 days’ supply for vehicles overall, according to Kelley Blue Book.
It’s not just about progress and scale, or about dealers wanting to rid themselves of inventory (which they have to pay for in the form of sky-high floor plan costs right now), it’s also about demand. Some would argue that, given the EV market has nearly fulfilled the needs of early adopters, the next wave of buyers will be trickier to tap into, thus creating a slight EV buying slowdown.
As a result, all sorts of EV offers are starting to become available. Interested car shoppers can get great lease deals on plug-in vehicles right now — and don’t forget the commercial EV tax credit could get you a tax discount for leasing, similar to the one you receive if you all-out purchase a qualifying electric car.
Have you bought a discounted EV? Were you on the fence about buying an EV until it was sold with incentives? Are you a dealer or car salesperson selling EVs with incentives? Reach out to this reporter at email@example.com.