In 2024, electric vehicle (EV) prices are expected to decline further due to a surplus of unsold inventory and a lag in consumer demand compared to production levels. Automakers, facing an excess of EVs on dealers’ lots, have been prompted to reduce prices, offer attractive lease terms, and provide cash rebates to stimulate demand. Tesla, the only profitable EV manufacturer, has notably lowered prices on some models by over 20% in the past year.
The trend of declining prices extends to the used EV market as well. A study by iSeeCars found that the average price of used EVs was 33.7% cheaper in October 2023 compared to October 2022. This trend is expected to continue in 2024, with forecasts suggesting more incentives and discounts.
Despite an increase in the share of electric and hybrid vehicles from 9% in 2021 to 16% in 2023, the growth in consumer acceptance has not kept pace with the exponential growth in product availability. The Biden administration’s proposed emission rules aiming for up to two-thirds of all vehicles sold in the U.S. to be all-electric by 2032 have led to increased production, resulting in a surplus of inventory.
Consumer reluctance to transition to fully electric cars is mainly driven by cost concerns, as EVs and hybrids tend to be more expensive than traditional vehicles. However, the introduction of federal tax credits in 2024 is expected to alleviate some of these cost barriers. Starting January 1, buyers can claim a federal tax credit of up to $7,500 at the point of sale for qualifying EVs or plug-in hybrids. This instant rebate eliminates the need for consumers to wait months to claim the rebate in their tax returns.
In addition to federal tax credits, nearly half of U.S. states offer additional tax credits, making the price of many EVs comparable to similar gas-powered vehicles in 2024. Despite these incentives, qualifying for the federal credit can be complex, depending on factors such as vehicle origin, buyer income, and previous credit claims. The lack of a comprehensive list from the Internal Revenue Service adds to the confusion, with buyers directed to the FuelEconomy.gov website for up-to-date information on qualifying models.