Supply of electric cars soars in the USA and prices fall by up to 30% – 12/05/2023 – Market

The battery-powered BMW iX is a technological marvel. It travels up to 516 kilometers on a charge, its glass sunroof becomes opaque at the touch of a button and you can increase the sound volume by turning your finger near the panel.

At the moment, one of these magical machines is on sale in Los Angeles, in the United States, for US$80,195 (around R$400,000), a 17% discount compared to the official list price.

If that’s a bit pricey, there’s an Ariya, Nissan’s new electric vehicle, listed for $36,690 in Kansas City — an 18% discount.

Even more affordable is the Hyundai Kona Electric, available in Atlanta for US$29,990 (R$148,000). That’s a 31% discount, making it almost as cheap as the petrol version.

To use a saturated advertising mantra, there has never been a better time to buy an electric car, at least in the US. The American market now has more than 50 models to choose from, more than double the options from two years ago.

As battery-powered car production volumes keep pace with demand, there is also an oversupply. U.S. electric vehicle inventories have increased fivefold in the past 12 months, according to digital listing platform CarGurus.

“For consumers, it’s a great time,” says Kevin Roberts, director of industry insights at CarGurus. “Electric cars are becoming much more affordable than they were a year ago, and we’ve already met much of the demand from early buyers.”

However, potential buyers must act fast (to use another advertising mantra). Excess inventory won’t last long.

Amid rising interest rates and stable inflation, price has been a major obstacle to the adoption of electric cars in the US.

In June, nearly two-thirds of U.S. car buyers surveyed by JD Power said there was a good chance they would buy an electric car, but many were unable to find one within their price range.

As of October, the average listing price for an electric vehicle on CarGurus was 28% higher than that of a gasoline vehicle.

Adoption is also affected by allocation formulas, which determine where new cars are sent.

Electric vehicles leaving U.S. factories are still disproportionately directed to dealerships in states like California that have regulations restricting sales of gasoline cars to certain dates.

“You’ll find large areas of the country where you might not find a dealership with a single electric in the yard,” says CarGurus’ Roberts.

But the electric vehicle premium is already starting to shrink, a trend started by Tesla by steadily reducing the prices of its two most popular models this year.

Ford followed suit, cutting up to $10,000 off the list price of the F-150 Lightning pickup truck. At CarGurus, average prices have fallen over the past 12 months for the Toyota bZ4X (-10.3%), the Kia Niro EV (-8.6%), and the Chevrolet Bolt EUV (-6.4%), among others.

Mahi Manchala, an IT director who commutes from New Jersey to Manhattan, just traded in her gas-powered Infiniti for a top-of-the-line Mercedes EQS priced at $130,000, a 6% discount from the list price.

The dealership even paid for a home charger, which cost almost $2,000 to install. “It’s the ultimate in luxury,” says Manchala. “And for what I got, it was the best deal.”

This heady time for consumers is at the same time a bit difficult for automakers, who have complained about a slowdown in demand for electric vehicles and highlighted price wars led by Tesla.

“With price discounts from some of the other guys of 30%, I would say this is a pretty brutal space,” said Harald Wilhelm, Mercedes’ chief financial officer, on a recent earnings call.

In fact, the glut of electric vehicles is scaring many auto executives into reducing production.

Ford has postponed or suspended $12 billion in spending on electric vehicles while reducing production of the Mustang Mach-E, its most popular electric model. GM delayed some models and abandoned its goal of building 400,000 electric vehicles by mid-2024.

But even with these growing pains, it’s hard to overestimate the momentum of the electric vehicle market.

Electric vehicle sales in the US have increased almost 2.5 times in the last 12 months. In the third quarter, electric vehicles accounted for more than 10% of new car sales in 11 U.S. states, according to Atlas Public Policy, and reached 7% in Texas — the country’s second-largest auto market after California.

“The stories that are being written that it’s falling apart are completely wrong,” says Elaine Buckberg, a former General Motors economist and now a senior fellow at Harvard University.

Part of the subtlety is that the difference between supply and demand for electric vehicles is not uniform — it fluctuates depending on the model. Vehicles that hit a sweet spot between price, range, features and design are selling quickly.

The Bolt, for example, which has a relatively high range and a relatively low price, is still in short supply. The same goes for the Cadillac Lyric, a chic SUV that aims to compete with German luxury brands, but starts below US$60,000 (about R$296,000).

“I wouldn’t say buyers have lost interest in electric vehicles,” says Ingrid Malmgren, policy director at the nonprofit Plug In America. “I don’t think that would accurately represent the situation.”

At AutoNation, which runs about 250 dealerships across the U.S., electric vehicles have been sitting on the lot for about 60 days on average, twice as long as gasoline vehicles. But weak demand manifests itself “in pockets,” says Derek Fiebig, vice president of investor relations.

“It’s a little more difficult for higher-priced cars,” Fiebig said at an Oct. 31 conference. “The lower-priced vehicles have qualified for federal funds, which helps, and so they are moving quite quickly.” Some U.S.-made trucks and SUVs priced under $80,000 and some cars priced under $55,000 are eligible for a $7,500 Rebate Inflation Act rebate.

In other words, the growing electric vehicle market is developing leaders and laggards. “We’re going to start to see customers get a little more demanding, and I think price is going to be really important,” says Roberts. “It’s starting to look like the regular car market.”