EV's cheap big time.

 

EV Makers Turn to Discounts to Combat Waning Demand

Car companies and dealers are slashing thousands off purchase prices to attract wary shoppers

Buyers looking to get a bargain on a new car might want to consider an electric vehicle.

As sales growth has slowed for battery-powered models, automakers and dealers are slashing prices and piling on discounts to clear out unsold inventory.

Some automakers, such as Hyundai Motor HYMLY 0.00%increase; green up pointing triangle and Ford Motor F -2.37%decrease; red down pointing triangle, are this month offering cash rebates as high as $7,500 on some models. Others are resorting to aggressive lease deals that offer cheaper monthly payments or shorter contract lengths to attract buyers. Many car companies are offering low-interest rate promotions in an attempt to make pricey EVs more affordable.

Market leader Tesla TSLA -0.31%decrease; red down pointing triangle has slashed prices this year across its lineup, reducing the starting price of some models by roughly a third. Ford Motor has also marked down its Mustang Mach-E SUV at least two times this year.

For consumers such promotions can be a boon, helping to shrink the price difference between an EV and a traditional gasoline vehicle. But it is another sign that the once-hot market for these models is losing its charge.

Car executives and dealers say the discounts and price cuts are necessary because buyers are less willing to pay a premium for an EV.Discounts are frequently used by carmakers to grab market share or sell unpopular models, but they also dent profits and can hurt resale values for buyers owning those models.

During the pandemic, the industry pulled back on such deals, in part because they had little inventory to sell. Still today, the spending on incentives and other sales promotions has remained constrained, helping to keep profits across the car business elevated.

The EV market has emerged as the one exception, partly because of new restrictions on a $7,500 federal tax for EV buyers and a more general slowing of demand for the technology, which for buyers comes with other challenges, such as needing a place to regularly plug in.

The new rules that went into effect in April limited the number of EV models eligible for the subsidy. Rather than let sales slump, many affected brands have tried to offset the loss of the $7,500 tax credit with a sales incentive for the same amount.

Tesla’s deep price cuts have also put pressure on others to respond with their own reductions. 

“We’ve seen the price come down much quicker than we had expected,” John Lawler, Ford’s chief financial officer, said during an earnings call in October.The sales promotions have taken different forms.

Ford is offering a $7,500 cash rebate on top of the federal tax credit on some F-150 Lightning pickup trucks. Volkswagen VOW -1.02%decrease; red down pointing triangle is advertising a lease deal for the ID.4 electric SUV with no down payment.

On average, customers got a roughly $2,000 discount on an EV in September, compared with a year prior when they paid a $1,500 premium, according to car shopping website Edmunds. Industrywide shoppers paid around $930 less than the sticker price in September, according to the Edmunds data.

The wave of discounts is also threatening to exacerbate problems at loss-making startups, which are swiftly burning through their remaining cash. Luxury electric-vehicle maker Lucid Group LCID -6.49%decrease; red down pointing triangle in August marked down the price of its vehicles by up to $13,000, which analysts say is a sign of weakening demand.

EV startup Fisker FSR -3.96%decrease; red down pointing triangle said in October that it was lowering the price of its Ocean Extreme SUV, a brand-new model that went on sale this year, by $7,500 in response to “competitive realities.” Fisker’s vehicles don’t qualify for a federal tax credit because they are built outside the U.S., and the Lucid Air sedan is too expensive. 

Dealers say part of the problem is that a wealthier group of early EV adopters have already purchased a vehicle. Now, the industry is confronting a more reticent group of consumers, who are already being squeezed by high interest rates and rising costs.

“I think there was a miscalculation about demand and how much EVs would be coveted,” said Joseph Yoon, an Edmunds analyst.