Prices for new and used electric vehicles have tanked, to put it mildly.
A study from iSeeCars released this week shows a 30% year over year decline in June compared to June 2022. That rate of decline has sped up from 8.8% in January and 16.8% in March.
As the universal vehicle pricing rule holds, when manufacturers like Tesla drastically reduce the prices of new models, prices on used ones follow the same path.
The driving forces span both the immediate and the “semi-permanent,” said Karl Brauer, executive analyst at iSeeCars, in a recent interview. In addition to rising interest rates, inflation, and recession concerns, the wealthier suburban consumer segment willing to embrace electric vehicles appears to be tapping out.
“California, Washington, and Oregon are the three states with the highest market share and are also among the six lowest growing states to increase EV market share,” Brauer said.
Most of the urban middle class are not ready to commit to EVs yet, leaving about 90% of potential vehicle buyers still unwilling to buy an EV. “It gets harder to move beyond the EV-friendly segment which is about 7-10% of the market,” Brauer said.
While used car prices overall appear stable, the steep drop in used EV values indicates no bottom pricing floor in sight.
“If everything costs more, then EVs cost more despite inflation (and price reductions), because they are the most expensive in any category of cars,” Brauer said. “All vehicle segments got more expensive. You must borrow more money to buy a car and it costs more to borrow money.”
EV Potential Looks Stronger for Fleets than Consumers
The lower EV prices, new and used, could present an opening for fleet operations considering or pursuing electrification, Brauer said. Despite the challenges of EV adoption for many consumers, fleets with regular duty cycles, regional logistics, and depot or home-based overnight charging are ideal candidates for adopting electric vehicles.
“The perfect use for fleet EVs is in an urban environment with fixed driving loops and charging bases — rinse, repeat,” he said.
In fleet operations, electric vehicles must work out from a cost-benefit analysis standpoint, foremost, Brauer said. Advantages for fleets include the lower maintenance costs because of fewer moving parts and the benefits of regenerative braking.
“For fleets it’s all about the money. It’s a business. The purchasing and ongoing operating costs have to make sense.
"With prices dropping, that adds to the numbers making sense. If a fleet manager can look at an EV and determine costs and operations, then the biggest variable is upfront investment. Those are dropping and could be an [incentive] for fleet buyers on the fence.”
Latest Numbers Show Average EV Prices Down 20%
EV prices continue to fall, again led by market leader Tesla. In June, the average EV average transaction price (ATP) was $53,438, down from a revised $54,528 in May and down from more than $61,000 in January, according to numbers released this week by Kelley Blue Book.
Incentives for EVs in June were 7.1% of ATP, behind only luxury vehicles. EV ATPs are down nearly 20% from their recent peak of $66,390 in June 2022. The price declines in the EV segment follow inventory increases experienced by some automakers in 2023.
Overall, as measured by days’ supply, the EV category is well above the overall industry. At the end of June, the EV segment days’ supply was 103 days, while industry days’ supply stood at 53.
“The steep drop in average EV prices this year, led by Tesla price cuts, has been a key driver of overall, industry-wide price moderation,” said Michelle Krebs, executive analyst at Cox Automotive, in a recent news release. “A year ago, the average EV price was above the average luxury vehicle price. Today, as inventory and availability build, EV prices are moving closer to the industry average.”
The Macro-Challenges of EV Adoption
Overall, the latest indices do not bode well for the electric vehicle market. Manufacturers are cutting prices which simply draws in more of the EV friendly market that wants to buy an EV anyway, Brauer said.
He cites one central catalyst that will propel electric vehicles into greater shares of the vehicle buying market:
“When will electric vehicles be as popular? When EVs are like internal combustion engine (ICE) cars, they will sell like ICE cars. When they’re not, they won’t sell as much.
That means 250-400 miles reliable range. When I stop, I need to have it take less than 10 minutes to refuel. When I buy the EV, it should cost the same as the average price of a fossil fuel car. Get the range up, the price down, and make the refueling time equal.”
Brauer outlined several key challenges for the EV market to overcome:
- When fuel prices bounce around, people get nervous and run for cover in low fuel or energy demand vehicles, including EVs. When prices stabilize, regardless at what level, consumers feel more confident to buy fossil fuel vehicles. Last year, more consumers were buying EVs to shelter themselves. And while fuel prices are still high, they have been the same for six months. “People stop freaking out.”
- Electricity prices in California have been rising at a high rate in the last few years. In some situations, EV powering costs are not cheaper than gasoline costs.
- The charging infrastructure so far is not consistent, reliable, or abundant enough to instill long-term confidence in EVs. “In the best case, you use a Level 3 charger with an 800-volt outlet and get an 80% charge in 20 minutes if everything’s perfect. But are the chargers working? Can the pay system work? Is there a charging outlet available? Can the car suck in energy that quickly? Is there a long line of EVs needing to use the Level 3 chargers?”
- As a result, range anxiety is not about getting stranded. “You must be stupid to get stranded in an EV.” The problem lies in having to plan out and resolve the charging challenge. For drivers of fossil fueled vehicles, you can solve a gas warning light problem within 20 minutes, given the proximity to available fuel stations in most areas. No one gets range anxiety even when the tank is close to empty. For EVs, it's the opposite. You must find where the charging stations are in a wide region and then carefully plan out routes while wondering if the chargers will be working or available.
- EV performance varies depending on extreme cold and hot temperatures, how many inclines it must traverse, and whether it is towing or carrying added weight. These variables affect EV batteries far more than fuel tanks. EV range estimates must be as accurate and predictive as EPA fuel mileage estimates.
- The timetables are still highly uncertain for developing enhanced, stronger EV batteries, such as solid-state, and refining battery technology.
- OEMs and EV startup manufacturers have either been losing money or accepting lower profit margins to kick-start the EV market. How long can this financial patience and capital investment hold up? “I’m not sure if OEMs can lose money for 10 years. It seems to be what they are telling themselves. Maybe they are correct. It looks like a long road to get there. I’m not sure they have capital storehouses. How long will companies operate on low profit basis until there are breakthroughs?”
Brauer concluded, “Will lower prices generate more sales. It depends.”
Tesla cut its prices in the past year and preserved its sales numbers. The question is about profitability.
“To get to 50%-65% market share for EVs, those issues will all have to be solved. You can’t just solve the high interest rates, inflation, and gas price volatility.”
Originally posted on Charged Fleet