Interest in electric vehicles (EVs) is rapidly increasing, with 51% of car buyers considering new or used EVs, up from 38% in 2021, according to a recently released Cox Automotive survey. With 33 new EVs launched in 2023 and 50 new or updated EVs slated for 2024, consumers have more options than ever.
Some barriers that once deterred potential EV buyers are falling. As EV infrastructure continues to improve, consumers are less concerned over a lack of charging stations, with an 8% decline in those reporting it as a deterrent between 2021 and 2022. New tax incentives and major price cuts from the all-electric manufacturer Tesla are positive signs for the future of EV adoption.
However, a lack of dealership preparedness, concerns over battery replacement costs, expensive car insurance premiums, and the high price of new EVs deter many consumers. Here’s what you need to know about the cost of EV ownership, bestselling zero-emissions models, charging infrastructure, and electric car insurance rates in 2023.
How much it costs to own an electric vehicle
The average transaction price of a new EV was $53,376 in August 2023, down nearly 20% from $66,524 in August 2022, according to KBB. Still, potential buyers are most concerned about price, with 43% reporting electric cars were too expensive in the latest Cox Automotive EV adoption survey. However, tax credits and lower fuel costs can make electric cars more economical.
Electric vehicle costs vs. gas car cost
The cost of gas is one of the most important factors for potential EV buyers, trumping even environmental friendliness. A staggering 73% of potential buyers listed fuel savings as a top reason for buying an electric car, while only 53% listed environmental friendliness.
The average cost of a new electric car is 10% higher than the price of a gas-powered vehicle — which costs an average of $48,451. But fuel costs can add up to significant savings for EV drivers over time. Annual fuel savings range from $1,363 to $2,471 for these models with electric and gas-powered versions.
Types of electric vehicles
Electric vehicles come in several types that can sometimes be difficult to distinguish. The key differences between hybrid electric, all-electric, plug-in hybrid, and hydrogen-powered vehicles are as follows:
- Hybrid electric vehicles (HEVs) are low-emission cars that use electric motors to support gas engines. HEVs rely on gasoline, and you don’t charge them at charging stations.
- Battery electric vehicles (BEVs) are entirely battery-powered, free of gas engine parts, and produce zero emissions. BEVs are capable of fast charging through an external port.
- Plug-in hybrid electric vehicles (PHEVs) are similar to hybrid vehicles but have a larger battery and electric motor. PHEVs also have a gas tank and a charging port.
- Fuel cell electric vehicles (FCEVs) get power from hydrogen and only emit water, vapor, and warm air. Hydrogen infrastructure to fuel FCEVs is still in the early stages of development, so you won’t see many on the road.
The EV trends and statistics explored below apply to BEVs unless otherwise noted.
Tax rebates and incentives lower the cost of EV ownership
President Joe Biden signed the Inflation Reduction Act into law in August 2022 — introducing three significant incentives that affect EV adoption, vehicle manufacturers, and car buyers. The act provides up to $7,500 in rebates to EV buyers.
Vehicle manufacturers also offer incentives that reduce the cost of EV ownership. For example, Kia offers a cash rebate of $3,750 for new Niro EV purchases. Chevrolet provides $500 rebates for first responders, students, educators, medical professionals, and military personnel who purchase a 2023 Bolt.
Many EV manufacturers, including Kia and Ford, also pair up with Electrify America or EVgo to offer complimentary charging for new vehicles. Additional incentives are available on a state-by-state basis. Power companies, state programs, and local climate initiatives provide credits and rebates for qualifying electric vehicles.
Tesla price cuts are reducing EV costs overall
In January 2023, Tesla announced a round of price cuts — from 20% off the Model Y, decreasing the price from $65,990 to $52,900, to 6% off the Model 3, reducing the MSRP by $3,000 to $43,990. The cuts coincided with the Inflation Reduction Act, making more models eligible for government incentives.
Tesla has made six rounds of price cuts so far this year. However, the manufacturer also walked some reductions back, and adjustments are ongoing. Model Y prices increased by $2,000 in February after an initial $13,000 cut. Tesla also tweaked multiple model prices by $500 in the same month. Here’s where Tesla’s base model prices stand today:
Shortly after the first round of Tesla price cuts, Ford announced updated MSRPs for the Mustang Mach-E, ranging from $900 to $5,900 off, depending on the vehicle’s options. Tesla makes three of the top 10 bestselling electric cars in 2023, so lower sales prices will likely motivate more competitors to follow suit.
Premium EVs have lower relative ownership costs than mass-market EVs
High transaction prices deter potential EV buyers, but premium EVs are more affordable than mass-market EVs on a relative basis, according to J.D. Power’s latest E-Vision Intelligence Report.
The average five-year cost of ownership of a premium compact electric SUV is $71,706 — just $287 higher than the average for internal combustion engine (ICE) vehicles in the same segment. Mass-market electric SUVs have lower five-year ownership costs, at $67,719, but comparable mass-market ICE SUVs cost $9,259 less over five years than their EV counterparts.
Leasing costs are a significant factor in luxury vs. mass-market EV affordability. The total cost of ownership on a three-year lease for the luxury Mercedes-Benz EQB is an average of $2,899 cheaper than the mass-market Ford Mustang Mach-E. However, federal tax credits for the Mach-E can bring costs down to just below the EQB.
The cheapest electric vehicles to buy in 2023
Though premium EVs have lower relative ownership costs over time, high transaction prices limit the number of potential buyers. Cost is one of the greatest barriers to EV adoption, so ownership rates will likely rise as more affordable electric cars hit the market.
Cheaper EVs still have higher insurance costs than the U.S. monthly average of $139, which could put off potential buyers. Insurance rates spiked 17% in the first half of 2023, and drivers may be cutting coverage to save, with 51% fewer shopping for full coverage in 2023 vs. 2022.
The Chevy Bolt has the lowest average rate but is 23% more expensive to insure than the national average. Greater costs for repair parts and fewer auto body workers familiar with servicing EVs contribute to costlier insurance claims and, therefore, higher rates.
These 10 car models cost less than the $53,376 average transaction price for new EVs in August 2023.
Electric vehicle sales in 2023
Tesla continues to dominate EV sales in the U.S., but other manufacturers are seeing significant surges in popularity. The Chevrolet Bolt, the most affordable of the bestsellers, saw the greatest year-over-year increase in sales between Q1 and Q2 2022 and Q1 and Q2 2023. Tesla could lose some of its hold as cheaper EVs enter the market.
These are the bestselling electric cars as of Q3 2023, according to KBB data.
Tesla deliveries fell below projections by 20,000 units in the third quarter, according to the company’s Q3 2023 production and delivery report. “A sequential decline in volumes was caused by planned downtimes for factory upgrades,” Tesla stated in a press release. The manufacturer will continue to target a volume of 1.8 million vehicles in 2023.
In Q2 of 2023, Tesla dominated EV sales with four models among the top 10 bestselling electric cars. However, Tesla Model S sales have decreased nearly 44% year over year, and the vehicle now ranks as the 12th bestseller, down from No. 10 in Q2. It’s unclear whether Tesla will maintain its remaining three spots in the top 10 for the rest of 2023.
States with the highest EV adoption rates
All types of electric vehicles made up 8.85% of the U.S. market share through the first half of 2023, according to AAI data. However, EV adoption is much higher in certain states than in others.
California leads the nation in zero-emission vehicles, with EVs comprising nearly a quarter of the market share. California’s stringent Zero-Emission Vehicle (ZEV) regulation, which requires a certain proportion of vehicle manufacturer sales to be PHEVs, FCEVs, or BEVs, has been adopted by 15 additional states.
EVs represent just 1.22% of the market in North Dakota. Access to charging stations, dealership options, incentives, local environmentalist programs, and a state’s political landscape influence EV adoption rates.
EV adoption rates by state as of H1 2023, including BEVs, PHEVs, and FCEVs, are as follows:
Barriers to EV adoption
The EV market is rapidly growing, but consumers, dealerships, and infrastructure aren’t completely prepared for the shift. New EVs will likely make up 40% of the market share by 2030, putting the total number of EVs on the road at 28.3 million, predicts S&P Global Mobility. U.S. charging infrastructure is not robust enough to support the maturing market.
The U.S. has 126,500 Level 2 charging stations, which can charge an EV in about five hours. Level 3 chargers, which can charge new EVs to 80% in 15 to 20 minutes, are harder to find, with fewer than 13,500 stations nationwide. To support the growing EV market, the U.S. needs to add 700,000 Level 2 and 70,000 Level 3 chargers by 2025, S&P Global Mobility estimates.
Dealerships pose another barrier to EV adoption. Nearly 10% of franchised dealers surveyed by Cox Automotive said they weren’t at all prepared to service EVs, and 9% said they didn’t feel prepared to sell them. The preparedness gap may come from a lack of EV education, with 63% of dealers reporting they were slightly or not at all familiar with battery health diagnostic tools.
Even if dealers feel prepared to sell and service EVs, a staggering two-thirds of American dealerships don’t have electric cars in stock, according to a nationwide survey by the Sierra Club. However, EV inventory increased 271% since September 2022, averaging 89 days of supply year to date, according to Cox Automotive.
A lack of affordable options may be the greatest barrier to EV adoption, with a cumulative 70% of respondents citing expensive vehicle prices and battery replacement costs as deterrents in a recent Cox Automotive survey. Most EV owners had an average household income between $125,000 and $150,000 in 2019, according to a Transportation Energy Initiative report.
Solving the cost barrier isn’t as simple as lowering the transaction price of EVs. Lower-income residential areas need more low-cost charging infrastructure. EV incentives are also generally received post-purchase, limiting options for low-income buyers.
New EPA emissions guidelines could drive EV market growth
In April 2023, the Environmental Protection Agency (EPA) proposed new emissions standards to reduce air pollutants from light-duty and medium-duty vehicles. The EPA’s plan would phase in over model years 2027 through 2032 and is expected to prevent 7.3 billion tons of CO2 emissions, equivalent to the amount produced by the U.S. transportation sector over four years, by 2055.
The stringent standards will likely face opposition. In September 2023, the U.S. Court of Appeals for the District of Columbia Circuit heard two cases challenging a 2021 EPA rule that strengthened tailpipe pollution limits and a 2022 order that restored California’s authority to set state tailpipe pollution standards. The cases may eventually escalate to the Supreme Court.
The proposed 2023 standards will likely face ongoing pushback from auto industry groups. “[The] EPA’s proposed emissions plan is aggressive by any measure. By that, I mean it sets automotive electrification goals in the next few years that are … very high,” wrote John Bozzella, CEO of the AAI, in a press release.
Some car manufacturers, however, are on board. General Motors plans to phase out all gas and diesel engine vehicles by 2035. Volvo, Cadillac, and BMW’s Mini brand have announced plans to go all-electric by 2030.
As manufacturers adapt to stricter emissions regulations, consumers will see more EV models flood the market. Increased competition will likely lead to more affordable EV pricing, reducing the purchase-cost barrier. Infrastructure and availability could soon surpass cost as the biggest deterrent to EV ownership.
This article originally appeared on Insurify and was syndicated by MediaFeed.
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