The dramatic price reductions made by Tesla last month contributed to a $3,300 decrease in the average cost of a newly purchased electric car throughout the United States. Based on a report from Kelley Blue Book (KBB), a company for vehicle valuation, the average cost of an electric car in December was $62,088 but dropped to $58,725 in January.
Tesla vehicles cost an average of $59,648 in January, lower than $65,080 in December. The price reductions made by Tesla on Jan. 13, 2023, are the cause of the reduced selling prices. These price drops are aimed at boosting sales and expanding the number of vehicles that qualify for the $7,500 new EV tax credits.
Following this, Tesla has changed its vehicle prices multiple times. For instance, Tesla’s Model 3 car, which was previously priced at $46,990 before the price adjustments, is now priced at $42,990, and the Model Y SUV’s starting price is at $54,990, which is lower than $65,990 previously.
A year ago, these two Tesla Models 3 and Y were by far the most preferred electric vehicles. A separate report indicated that the cost of secondhand Tesla vehicles has also decreased dramatically recently. Tesla accounts for nearly two-thirds of the overall electric vehicle market, so the price reductions had a substantial effect on the average price of electric vehicles, as reported by Kelley Blue Book.
The price cuts have made Tesla vehicles significantly more cost effective, and customers are making the most of the opportunity to purchase vehicles. According to the KBB report, sales increased by 30 percent in the month following the price reduction compared to January of this year, implying that the lower prices likely assisted Tesla in delivering higher sales volumes.
Following Tesla’s lead, Ford announced price reductions between $600 and $5,900 for its electric Mustang Mach-E SUVs for the period ending January 2023. In addition, Lucid, a premium manufacturer of electric vehicles, revealed that it was giving tax credits of up to $7,500 on a few of its models that are not eligible for the tax credit being offered by the government because they are too costly.
It’s not just electric cars that are becoming more affordable —most cars are seeing price reductions. During January 2023, the average cost of a newly purchased car fell by $310 to $49,388 after hitting a record high last year in December. But, compared to other types of vehicles, the average cost of electric vehicles fell last month by a much greater margin.
As models from automakers such as Lucid Motors (NASDAQ: LCID) become more affordable, more consumers could make the switch and accelerate the transition to electrified transport.
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