September 2023 Update: The average transaction price for an EV dropped last month. Check out the details below.
Car buying is the second biggest expense most consumers will ever make, and more drivers are getting squeezed into $1,000/month car payments. With an EV, you can save hundreds of dollars per month in fuel costs, but the upfront cost of getting into an electric car is substantial. Here’s the average price of an electric car today, and how much prices have increased over the past three years.
Wondering when EVs will get cheaper? We’ll dive into that too.
The Average Price of an Electric Car Is 10% Higher
As of the most recent data from August 2023, the average transaction price for a new car (of any powertrain) was $48,451 according to Kelley Blue Book. That’s a 0.6% increase since the month prior. In August 2023, the average electric car price was $53,376 (for new cars).
In 2023, electric cars cost 10% more than the overall market average. Last year, EV prices averaged more than 15% higher than the overall market.
Looking at historical data, it’s clear that EVs are getting cheaper, despite the luxury leanings of most new models. Over the past year, the average price paid for a new EV has declined by 16%. According to KBB, new EV pricing peaked in June 2022 and has fallen more than $6,000 so far in 2023.
Why Are EV Prices Dropping?
Why did the average price of an EV dropping so quickly? Tesla keeps slashing prices, in turn launching an all-out price war with the competition. $55,000 is not cheap, of course. An abundance of luxury options continues to keep the average price of an electric car well above gas counterparts.
On top of that, Ford and GM have been steadily increasing prices for their electric trucks. E-truck prices are generally expensive (see ALL electric truck prices here). The new Chevrolet Silverado EV is not going to be as affordable as originally claimed. Most electric trucks cost over $70,000 once trim and spec availability is considered.
Although the average EV sells for 10% more than gas-powered models, here’s a breakdown of the starting MSRP for the top 10 electric car models on sale right now. As you can see, not all EVs are quite this expensive:
- Tesla Model Y ($47,740)
- Tesla Model 3 ($40,240)
- Ford Mustang Mach-E ($46,995)
- Tesla Model S ($74,990)
- Chevrolet Bolt ($27,495)
- Tesla Model X ($79,990)
- Hyundai IONIQ 5 ($41,450)
- Kia EV6 ($42,600)
- Volkswagen ID.4 ($37,495)
- Ford F-150 Lightning ($49,995)
The average starting price for the top 10 best-selling electric cars in America is $48,899, which is 10% lower than six months prior.
EV Price Trends
In January 2020, the average electric car price was $54,668, or 42% higher than the overall market average. In 2023, the average cost of a new EV is $53,376 or about 10% higher than the overall new car market. That’s a lot better than where the EV marker was in early 2022, when EV prices averaged north of $65,000. Here’s how the average cost of an electric car has changed monthly since January 2020.
|1-2020||2-2020||3-2020||4-2020||5-2020||6-2020||7-2020||8-2020||9-2020||10-2020||11-2020||12-2020||1-2021||2-2021||3-2021||4-2021||5-2021||6-2021||7-2021||8-2021||9-2021||10-2021||11-2021||12-2021||1-2022||2-2022||3-2022||4-2022||5-2022||June 2022||July 2022||August 2022||September 2022||October 2022||November 2022||December 2022||January 2023||February 2023||March 2023|
|Average EV Price||$54,669||$56,326||$56,059||$57,757||$58,863||$57,480||$57,346||$57,346||$54,381||$52,947||$53,117||$53,811||$57,750||$57,491||$56,503||$56,059||$56,140||$58,914||$56,110||$57,540||$56,312||$55,625||$56,437||$63,821||$62,876||$64,807||$66,386||$65,094||$64,553||$66,997||$66,645||$66,524||$65,291||$64,249||$65,041||$61,448||$58,725||$58,385||$58,940|
|New Car Average||$38,747||$38,550||$38,812||$39,904||$39,138||$39,731||$39,512||$39,571||$40,159||$40,770||$40,937||$41,335||$41,248||$41,366||$40,680||$41,172||$41,534||$42,633||$43,056||$43,418||$45,031||$46,026||$46,329||$47,243||$46,404||$46,082||$46,223||$46,676||$47,275||$48,043||$48,182||$48,301||$48,094||$48,281||$48,681||$49,507||$49,388||$48,763||$48,008|
When Will Electric Car Prices Go Down?
Simply put, EV prices are most likely to go down once they become truly mainstream. The great news is that many analysts agree that we’ve reached that point in early 2023. With EV market share climbing to a new record of 7.2% of all new vehicle sales in America in Q1 2023, there’s new support for the theory that once the auto market surpassed 5% EV market share, rapid adoption will follow.
However, there’s a big, expensive elephant in the room that’s blocking the path to much higher EV adoption: high prices. Lithium prices have dropped quickly in 2023 following a big spike last year. Generous EV tax credits have returned for Tesla models – the best selling EVs in the nation. Why aren’t prices dropping right now? Demand for new EVs remains very high. Dealers sell their electric inventory much faster than ICE models, and are rarely compelled to cut prices.
In order to change that, automakers will need to make more EVs, so that we can finally get some sitting on the lot for more than a few days. That could finally happen later this year with the arrival of many new mainstream electric models.
Smaller Battery Packs, More Affordability
However, there’s another possibility that I suspect we’ll be hearing more about. Automakers and their supply chain partners (not to mention governments) have invested nearly $1 trillion dollars in electrifying global transportation. It’s been called the second industrial revolution, and one that will largely determine the world’s ability to combat man-made climate change. Automakers don’t want the EV revolution to fail.
But with rising production costs forcing EV prices higher, what could they do to return affordability to the consumer? I expect automakers to begin announcing lower range, more affordable electric vehicles. Less range might leave you skeptical, but remember that $7.5 billion was allocated to creating a national charging network in America.
Aside from federal money, Tesla, Electrify America, EVgo and even automakers themselves are also quickly installing fast chargers throughout the country. In 5 years’ time, range won’t matter nearly as much because chargers will be commonplace.
How might this play out? We’re already starting to see it happen. Volkswagen announced a new version of the ID.4 electric crossover that starts at just $37,495 with 208 miles of range. Plus, it’s made in America and qualifies for the new EV tax credits! That’s well below the longer-range option with 275 miles of range, but it costs at least $4,000 less. Hyundai says it will soon offer a standard range version of the IONIQ 5 with less range at a lower price. I expect General Motors and Ford will soon do the same, especially with future electric crossovers like the impressive Equinox EV.
Thinking of Buying?
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