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.
There is a wide difference between the cost to the consumer, with umpteen costs offloaded or charged to others, and true economic competitiveness ex subsidy and mandate.
' 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. '
Just what the climate needs.
More SUVs.
But of course the trick is to compare them to a similarly monstrously over specified for acceleration and massively weighty ICE, and then claim 'improvement' instead of anything which has genuine credentials in environmental concern.
Pick your baseline, and you can show anything, if you are dishonest enough.
Posted by: Davemart | 30 March 2023 at 03:35 AM
This all of course depends on whether pure EVs become the norm or some type of hybrid of ICE, FCEV, eFuel, etc., post 2030s. I am not convinced that pure plug-ins fit the majority of all households and living/working situations, especially multi-family residential and inner-city situations with limited parking. Band-aid solutions such as increased street-side, public retail, and shared gas-station/ freeway charging infrastructure can only do so much and it is not clear that the price of an electric mile will be competitive to $1/gal gas, in these situations, which is the price of a growing ownership and pro-road trip culture we should all support and encourage. As a pro-infrastructure Libertarian, personal choice and availability of opportunity must always come first within the context of a robust highway and transit system. An electrified industry can provide numerous advantages and very little economic and personal freedom downside, but they must be not used as a punitive tool against the perceived consumer-culture-over-reach that forms the vanguard of many enviro-agendas - less is never more, as previously advocated last century.
Posted by: Jer | 30 March 2023 at 06:31 AM
Both, the ICE manufacturers and fuel suppliers, were smooth geared and well oiled enhancing each other for over a century. Eventually, the best deal comes to an inevitable end and that is definitely the case for the two afore mentioned. There are many reasons for disliking BEVs but not all dislikes are really valid arguments that score against them.
A somewhat valid argument is the charging infrastructure for BEVs but the present state its not yet the end of the day. Everyone should call to mind that the ICE-infrastructure had over a century of time to grow to that what it is today. A comparable charging infrastructure also needs time to grow. Some acceptable time will have to be allocated to reach a point of satisfaction for all those concerned.
Batteries are continually improving in charging time, power - and energy density, and cycle life. Within a few years batteries will have developed to such a point where nothing leaves to be desired. We'll just have to be patient and allow "the chicken to be hatched".
Posted by: yoatmon | 30 March 2023 at 07:25 AM
I am all in favour of BEVs, where there is somewhere to charge them up conveniently, which ain't the case for many folk.
What I am against is montrously fat, heavy cars with road unsuitable, tire shredding acceleration, consuming excessive amounts of materials to build, including the huge batteries they need.
Subsidising these bling cars for the well off is nonsense, and their environmentalism is fake.
I am opposed to SUVs for general use, whether powered by ICE, hybrid, fuel cells, or batteries.
Posted by: Davemart | 30 March 2023 at 07:54 AM
@ Davemart:
Well, at least we have something in common.
Posted by: yoatmon | 31 March 2023 at 04:35 AM
Years ago, when I drove an ICE vehicle, I had to endure the inconvenience of going to a gas station to "fill-up". I didn't have the convenience of a filling station in my front yard. However, now I have the convenience that a Wall-box offers me in my garage . I know that not everyone has a Garage with a Wall-box but neither do they have the convenience of a filling station right in front of their home.
Posted by: yoatmon | 31 March 2023 at 04:47 AM
yoatman:
The situation in the US is so atypical that it can lead to a somewhat misleading impression of possibilities elsewhere, where the overwhelming majority of motorists right now, and enormously more so by 2050 with the population of potential drivers will be, most of them in cities, and with access possibilities limited.
And the costs of individual chargers is under-reckoned, as multiply it by 1,500 or so which the average pump serves and you have quite a chunk of change.
There is absolutely nothing wrong with folk changing to BEVs where it works for them, and I am pretty enthusiastic for instance about the upcoming Renault 5 EV, even with current batteries.
What is absurd as using it as an excuse to subsidise bling cars for the comparatively wealthy.
Not as horrendous as the tax exemption on fuel for private jets, whilst if you catch a bus or a train you pay tax, but pretty horrid.
Posted by: Davemart | 31 March 2023 at 09:21 AM