After two years of supply- and cost-induced price hikes, electric vehicles are finally becoming more affordable, thanks to increased competition among EV makers and changing economic conditions. Earlier this month, Tesla lowered prices for its popular Model 3 and Model Y cars between 6 and 20 percent, driving a surge of demand that belied worries from Wall Street analysts that Tesla is losing its appeal. But other EV makers began cutting prices before Tesla did and the phenomenon has more to do than just one or two automakers willing to sacrifice profits for market share.
“The real driving force is simply supply and demand,” said Karl Brauer, executive analyst at iSeeCars, an automotive research firm. “Electric vehicle production was more challenging at the height of the pandemic while EV demand was strong. Over the past few months EV production has improved while interest rates and economic concerns reduced demand. This combination has forced automakers to reduce prices to keep cars moving off dealer lots.”
The first significant price drop of a popular EV came took place in summer 2022 when Chevrolet lowered prices for its 2023 Bolt and Bolt EUV by about $6,000 each, or more than 15 percent. After the discounts, Chevy Bolt started at $25,600, overtaking Nissan Leaf as the cheapest electric car in the U.S. In January, Chevrolet added back $900 to the starting price of Bolt, raising it to $26,500. Even after the slight increase, it’s still the most affordable EV available in the U.S.
Later in 2022, Hyundai slashed prices for its 2022 model year EVs as newer models arrived at dealerships. Hyundai’s 2022 Kona got a 9 percent discount to start at $34,000.
Then, in December, Tesla drastically cut prices first in China and then in the U.S. and Europe, triggering a price war among EV makers who compete in the same market as Tesla.
After price cuts, Tesla’s Model 3 now starts at $43,990 and Model Y $53,490. A lower retail price also qualifies Model Y to federal tax rebates under the Inflation Reduction Act, which means an additional $7,500 saving to most buyers.
On Jan. 30, Ford announced price cuts of as much as $5,900, or 8 percent, on its Mustang Mach-E, a midsize electric SUV targeting the same market as the Model Y. After the discounts, the entry-level Mustang Mach-E Standard Range retails for $46,000 and the GT Extended Range version starts at $64,000.
The mid-range Ford Mustang Mach-E Premium AWD version, a direct competitor of Model Y Long Range with a similar battery pack, is now priced at $53,995, only $500 more than a Model Y.
Ford said it will to apply automatic price adjustments to buyers who placed orders before the price cut and are waiting for their Mach-E delivery.
In China, Xpeng, a local rival of Tesla, slashed prices for its EV lineups by 10 to 13 percent earlier this month. Brauer of iSeeCars expect more EV price drops in both the U.S. and foreign markets.
“There’s every indication the macroeconomic forces [affecting automaker] will remain in play for the next six to 12 months, so we will see EV prices come down, but it will be more reflective of overall market conditions versus a specific electric vehicle price war,” he said.