The coronavirus pandemic saw a virtually unprecedented spike in the price of vehicles. As chip shortages hobbled the industry, automakers rationed semiconductors, installing them mainly in their most profitable, and most expensive, models. Millions of affordable vehicles, the ones accessible to most new car buyers, never got built.
That drove up the median price of new vehicles in the United States from around $38,000 before the pandemic to a record $49,000 or so this February, according to Cox Automotive.
With electric vehicles, the pain was even more acute — if you could find one.
In February, the average EV price soared to more than $58,000, according to Kelley Blue Book, roughly the annual income of the median U.S. worker. Dealers have been able to charge well over the sticker price as buyers have lost the ability to negotiate.
“If someone hasn’t been in the market, they’ll be really shocked by how much a vehicle costs,” says Mark Wakefield, an automotive specialist at the global consulting firm AlixPartners.
The limited supply of EVs is colliding with unexpected demand. Despite inventories at a fraction of their pre-pandemic levels, EV sales are outperforming even the more optimistic projections of a few years ago. In January 2022, EVs represented just 4.3 percent of new sales. This January, the share was more than 7 percent.
“EVs are still hot enough they’re essentially sold out for the rest of the year,” says Ivan Drury, who analyzes the automotive market for Edmunds.
But even with vehicle prices near record highs, better deals may soon be at hand. Tesla is slashing prices, prompting the rest of the EV industry to follow suit. New federal tax subsidies are coming online, though which vehicles qualify is a moving target. And automakers are releasing a fleet of new all-electric models over the coming months.
What’s a prospective EV buyer to do: Buy now or wait?
There’s no right answer, but the decision boils down to a few other questions: How much can you spend? What type of vehicle do you need? Do you (or your EV) qualify for federal incentives? Would you buy used or lease?
Here are the key questions for an EV shopper.
Are EV prices coming back down?
Yes, slowly. EVs remain well above the industry average, reports Kelley Blue Book, but prices have been on a steady decline since the beginning of the year. The new federal incentives could lower them even more.
Tesla started reducing prices to guard its dominant market as some federal incentives for Tesla’s EVs are phased out under new rules on April 18. Since January, Tesla has cut the prices of its base Model 3 and Model Y by 11 percent and 20 percent, respectively. Tesla still controls more than half of the EV market in the United States, and other automakers have followed its lead. The average price paid for a new EV in February fell by 1.8 percent, or $1,050, over the previous month, reports Kelley Blue Book.
Another factor is more models hitting showrooms. Dozens of new all-electric models are expected to debut in the next two years, expanding the EV selection beyond today’s concentration in sedans and small crossovers and SUVs. Rivals could start lowering prices more as competition heats up.
Should I wait for the new models?
When it comes to electric vehicles, your options are large, affordable or long range. “You can pick two,” says David Undercoffler of Autolist, an online car shopping platform. Small sedans and hatchbacks like the Model 3, Model Y, Chevy Bolt and Nissan Leaf have been the mainstays of the market. The Bolt starts at $26,500. Recently, automakers have focused on selling somewhat compact SUVs and crossovers with ranges of about 250 miles. That includes the Hyundai Ioniq 5, Kia EV6, Ford Mustang Mach-E, Tesla Model Y, Kia Niro EV and Volkswagen ID.4.
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The author of the report is Michael J. Coren
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