E-Vision Intelligence Report
April 2024
Are New Lease and Financing Deals Enough to Pull Mass Market Shoppers into the EV Market?
Key Findings
- Mass Market Shoppers Have Highest Level of Interest in EVs: The number of new-car shoppers who say they are “very likely” to consider an electric vehicle (EV) for their next purchase is highest among those with median household incomes under $150,000. But at $59,560, the current average Manufacturer Suggested Retail Price (MSRP) for EVs is $2,227 more than comparable gas vehicles. That said, federal government and manufacturer incentives are quickly chipping away at the gap. Incorporating those variables, the average customer-facing transaction price for EVs is only $83 higher than comparable gas vehicles.
- Lower Total Cost of Ownership Boosts EV Affordability: When total cost of ownership—which includes all predicted costs required to purchase and maintain the vehicle throughout the full ownership period—is factored into the equation, EVs are now more affordable than comparable gas vehicles. The surge in affordability is not only driven by tax credits and charging incentives, but lower operating costs and improved residual values for 2024 model-year Tesla vehicles.
- Pent-Up Demand Growing Among New-Car Shoppers: While EVs and comparable gas vehicles are similarly priced, all vehicle prices have risen since many shoppers were last in the market. The average vehicle trade-in age has climbed to 6.2 years in 2024, up from 6.0 in 2023 and 5.6 in 2022. The last time these shoppers were in the market, the average transaction price was $32,496. Today, average monthly payments are $271 higher for gas vehicles and $345 for EVs. But as dealers and manufacturers introduce new sales incentives to lower payments, there could be an increase in sales.
Executive Summary
Cars have gotten really expensive. While the average new-vehicle retail transaction price is down 3.6% from the highs seen in March 2023, new-vehicle shoppers are still looking at an average transaction price of nearly $54,000 in the most popular segments. For EVs, that number swells to $57,637 before federal tax credits, and $53,816 after federal tax credits. Now, however, as these sky-high valuations have helped create a build-up of inventory, automakers are starting to lower prices and introduce incentives to spur sales. Will they be enough to get more mass-market shoppers into EVs?
This E-Vision Intelligence Report dives into key data points trending in each monthly EV Index update, along with other data points gathered from JD Power studies and pulse surveys, to spotlight emerging trends and important shifts in EV consumer sentiment.
Mass Market Hungry for EVs
It is no secret that early EV adopters were largely affluent, progressive consumers who could afford the six-digit price of entry for a Tesla Model S. But the dynamics of consumer demand are starting to shift. In terms of absolute volume, the number of new-vehicle shoppers who say they are “very likely” to consider an electric vehicle (EV) for their next purchase/lease is highest among those with median household incomes under $150,000 (see chart below).
EVs Getting More Affordable
While overall transaction prices for EVs are considerably higher than comparable gas vehicles, EV affordability is starting to improve, driven by several factors. First, EVs require less maintenance and, on average, cost $900 less to operate throughout the full ownership window. In fact, according to the JD Power EV Index, which evaluates EV affordability based on total cost of ownership for three-year lease and five-year purchase time frames, EVs are now more affordable than comparable gas vehicles.
Tax credits and steep discounts, along with incentives from manufacturers, are helping to drive down EV prices. Tesla, for example, which accounts for 56% of all EVs sold in the United States, has seen its affordability score improve 5 points (on a 100-point scale) in the JD Power EV Index, driven by better residual values and a relatively high purchase mix. Interestingly, while Tesla has been categorized as a premium brand due to the average sale prices of its vehicles, demographics of the average Tesla owner are tilting heavily toward the mass market buyer. As noted in the table below, 46% of current Tesla owners have household incomes of $150,000 or less, which is nearly double the number of other premium EV brands.
Industry-wide, EV buyers are seeing discounts of 3.2% off MSRP, excluding the federal tax credit. When the tax credit is included, EV buyers see discounts of 9.6%, which is notably more than gas-vehicle buyers in comparable segments, which see a 6.3% discount, on average.
Cash on the Sidelines
Another important factor helping to influence recent trends in consumer demand for EVs is the dramatically increased cost of entry of all vehicles—particularly among buyers who last purchased or leased before the start of the pandemic, when inventory and incentives were historically high. Shoppers returning to market in 2024 are paying, on average, about $600 per month for their vehicles. From that $600 baseline, the average jump to a new gas vehicle in a comparable-EV segment is $271, for a total outlay of $871 per month. For an EV, the gap is even higher at $345, for a total monthly outlay of $945. But when comparing the total cost of ownership between new EVs and comparable gas vehicles, including state tax incentives, charging incentives and lower operating costs, the average monthly outlay is $31 less expensive.
Even so, given the heavy dose of upfront sticker shock in general, many shoppers are holding onto their existing cars longer. The average vehicle trade-in age has climbed to 6.2 years in 2024, up from 6.0 in 2023 and 5.6 in 2022. This has created considerable pent-up demand in the marketplace, which could shake loose with the introduction of competitive sales incentives addressing both high prices and high interest rates.
Methodology
This JD Power E-Vision Intelligence Report is based on data and insights from the JD Power EV Index, the JD Power EV Retail Share Forecast, the JD Power 2024 U.S. Electric Vehicle Experience (EVX) Ownership Study, the JD Power 2023 U.S. Electric Vehicle Experience (EVX) Public Charging Study and the JD Power U.S. Electric Vehicle Consideration (EVC) Study. The JD Power EV Index is an analytics tool to benchmark the growing EV market in the United States. It tracks millions of data points aggregated into six categories—interest, availability, adoption, affordability, infrastructure and experience—to evaluate the progress to parity of EVs with gas-powered vehicles in the U.S. Each month, the JD Power electric vehicle practice will analyze these data points, and others to spotlight emerging trends and important shifts in consumer sentiment that are helping to define the fast-moving EV marketplace.
Find out More
This report was authored by Elizabeth Krear, vice president, electric vehicle practice; Brent Gruber, executive director, electric vehicle practice; Stewart Stropp, executive director, electric vehicle practice; and Kristen Richter, senior manager, electric vehicle practice. The JD Power E-Vision initiative is a company-wide program focused on maximizing JD Power industry-leading EV data, analytics, insights and solutions. Please contact us at the numbers below to connect with the authors or to learn more about the underlying research.
Media Contacts
Shane Smith; East Coast; 424-903-3665; [email protected]
Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]