| J.D. Power: EV price pressure grows as government incentives and lease deals wield outsized influence on consumer demand
30 March 2023
Due to a steady increase in availability of new models, expanded price mix within existing models and widening eligibility of federal and state incentives, acquisition cost is starting to fade as a hurdle to EV adoption, according to J.D. Power.
According to the J.D. Power EV Index ( earlier post), a new, advanced analytics tool that tracks the progress to parity of EVs with internal combustion engine (ICE) vehicles in the United States, this steady decline in price mixed with surging availability is setting the stage for a new era of EV price wars.
Total EV market share has now reached 8.5%, nearly double the share of a year ago. The trend is consistent with steady growth in availability and affordability. The J.D. Power EV Index score for availability climbed sharply to 39.4 (on a 100-point scale) in January 2023 from 35 in December 2022, meaning approximately four-in-ten new vehicle shoppers currently have a viable alternative to ICE vehicles.
Overall affordability has also improved by a similar margin, rising to 85.6 in January. Once the overall affordability index reaches 100, EVs will have reached price parity with their internal combustion engine (ICE) counterparts.
At the current trajectory, J.D. Power projects that approximately half of all vehicle shoppers nationwide will have a viable EV option available to them by the end of 2023. By the end of 2026, that number is expected to surpass 75%.
The strong influence of consumer price sensitivity on EV consideration and adoption is on vivid display across several data points in this month’s J.D. Power EV Index. The first evidence can be seen in consumer interest in the Ford Mustang Mach-E and the Tesla Model Y following the reclassification of both vehicles as SUVs, which made them eligible for a $7,500 federal tax credit under the Inflation Reduction Act. Additionally, both manufacturers recently announced significant price cuts on both models.
Consumers responded immediately with a 3.4 percentage point increase in consideration in the Mustang Mach-E and a 1.6 percentage point increase in consideration in the Model Y.
J.D. Power finds a clear correlation between the states with biggest government incentives and consumer EV adoption rates. In California, for example, which currently has an adoption score of 45 (highest in the nation), state tax credits on the purchase or lease of a new EV is $2,000 for cars and $4,500 for trucks, SUVs and vans. Similarly, Oregon, which has an adoption score of 36, currently offers a $2,500 credit on EVs with a retail price at or below $50,000 and a $5,000 credit for EVs that meet certain battery size requirements, making many EV drivers in Oregon eligible for upwards of $7,500 in state rebates. J.D. Power sees similar trends in Colorado, New York and New Jersey where state-level EV incentives have had a significant influence on adoption.
The culmination of these trends taken together is a steady downward pressure on the price of EVs relative to their ICE counterparts. This is a significant turning point from the early days in the EV marketplace when the few viable models available were priced above $100,000. Now, due to federal incentives introduced in the Inflation Reduction Act and growing vehicle supply, prices of many models are trending lower.
The best examples of this trend are the Chevrolet Bolt and Bolt EUV. With incentives, the total cost of ownership of a new Bolt is now just $26,200, down $6,600 from December of last year. Likewise, the Bolt EUV has seen its total cost of ownership fall to $30,900. As this trend continues, J.D. Power says it expects to see continued pricing pressure on new models driving increased competition in the EV market.
Posted on 30 March 2023 in Behavior, Electric (Battery), Market Background