The Growing Trend of Massive Discounts on Electric Vehicles: Luxury Models in the Spotlight
CNN — Thanks to intense competition in the automotive market and consumer hesitation, automakers and car dealers are now offering massive discounts on electric vehicles (EVs), particularly luxury models.
The market of eager early adopters, those individuals who prioritize the latest technology in their vehicles, has already been saturated, according to Joseph Yoon, a consumer insights analyst at Edmunds. As a result, automakers find themselves having to target mainstream consumers with different priorities.
Hybrid models, which feature a well-established and trusted technology that doesn’t necessitate charging stations, are gaining more consumer interest, according to Pat Ryan, the CEO of the car shopping app company CoPilot. In contrast to EVs, hybrids are being sold for more than their sticker prices and are quickly being sold off dealer lots, as reported by data from Edmunds.
“The adoption curve for hybrids is much further along,” stated Ryan.
For a long time, Tesla held a monopoly over the EV market. However, in an effort to maintain its dominant market share with an aging lineup of models and to counter the price pressure on EVs, Tesla has aggressively reduced prices. For instance, the base sticker price of a Tesla Model 3 has dropped by 17% over the past year. Now, other automakers, particularly luxury brands, are also offering significant discounts on EVs.
In September 2022, the average price of an electric vehicle purchased in the United States, excluding Teslas, was approximately $1,500 above the sticker price. However, a year later, the average EV was sold for about $2,000 below the sticker price, according to Edmunds. This represents a much bigger change and a deeper discount compared to the overall industry, where the average new vehicle sold for only about $900 below its sticker price in the same period.
Interestingly, while the average price paid for a non-Tesla electric vehicle slightly increased over the past year, EV buyers are now getting more value for their money. This is largely due to the fact that the EV market is heavily dominated by luxury brands like Audi, BMW, and Mercedes. Even mainstream brands like Volkswagen and Hyundai tend to offer more expensive EV models. However, with the current discounts, EV buyers are able to get a much better deal.
For example, customers who purchased the Audi E-Tron GT, which has an average sticker price close to $119,000, received discounts of over $7,200, according to Edmunds. It’s not just high-dollar EVs that are being heavily discounted, as the Volvo XC40 Recharge, with an average sticker price of around $61,000, is selling with discounts averaging about $7,750, according to the same source.
It’s important to note that these discounts do not include government tax incentives. However, there is a tax credit advantage for leased vehicles as compared to purchased vehicles, due to a tax law loophole. Most restrictions drop if a vehicle is leased instead of purchased, including the cap on vehicle price. The tax credit goes to the leasing company, which can then pass it onto the consumer in the form of reduced lease payments. Edmunds’ pricing analysis does not include these types of incentives, so the tax credit is an additional benefit on top of the listed discounts.
In general, the deepest discounts are offered on vehicles with higher sticker prices. Nevertheless, consumers can still find significant savings on non-luxury EVs. For instance, the average discount on a Volkswagen ID.4 is around $2,900, while discounts on the Nissan Ariya average about $2,200. Although these vehicles still come with a price tag of around $50,000, when combined with discounts and tax credits, they end up costing about the same, or even slightly less than the average new vehicle.
Since many of these EV discounts can be combined with the $7,500 tax credits, even already affordable EVs like the Chevrolet Bolt are being sold at substantial discounts.
The trend of massive discounts on electric vehicles, particularly luxury models, is gaining momentum in the automotive market. With growing competition and a shift in consumer priorities, automakers and car dealers are offering attractive deals to appeal to mainstream consumers. This shifting landscape is making EVs more accessible and affordable, paving the way for wider adoption of these innovative vehicles.