Americans defied expectations by purchasing a total of 1,189,051 electric vehicles (EVs) last year. This represents a significant increase from previous years, with EVs accounting for 7.6% of all new vehicle sales, up from 5.8% in 2022 and 3.2% in 2021. While the growth rate of EV sales slightly slowed throughout the year, they continue to be the fastest-growing category in the car sales market.
In the fourth quarter, EVs shattered records in terms of both volume and market share. Between October and December, Americans bought a remarkable 317,168 electric cars, making up 8.1% of all new car purchases during that period. Compared to the fourth quarter of 2022, EV sales increased by an impressive 52%.
Tesla Dominates the Market
When it comes to EVs, Tesla remains the unrivaled leader. In 2023, an astonishing 55% of all EVs bought by Americans were Tesla vehicles. Although the company's market share decreased from over 70% in the first quarter of 2022 to just 50% by October, Tesla made a comeback in the final quarter thanks to an aggressive price-cutting campaign.
By reducing prices, Tesla made its most affordable models, the Model Y SUV and Model 3 sedan, accessible to more American consumers. "One out of every three EVs sold was a Tesla Model Y," highlights Stephanie Valdez Streaty, Director of Strategic Planning for Cox Automotive (parent company of Kelley Blue Book).
Increasing Competition in the EV Market
While Tesla maintains its dominant position, numerous new competitors entered the EV market in 2023. Almost every major automaker introduced at least one electric car during the year. Volkswagen experienced an impressive 85% year-over-year EV sales increase with its ID.4, while Hyundai saw a 48% growth in sales, largely driven by the popularity of its Ioniq 5.
As the adoption of EVs continues to rise, it is expected that car manufacturers will intensify their efforts to compete in this rapidly expanding market. With more affordable options and increased competition, the future of the EV industry looks promising.
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More, but slower growth in 2024
Reports of a surplus of unsold EVs have some analysts questioning the appeal of electric cars. While early adopters have embraced them, the rest of us remain skeptical.
However, Cox Automotive remains optimistic about future growth in 2024. According to Valdez Streaty, "We still believe there will be more sales, with EV sales in the U.S. surpassing the record of over 1.1 million units set in 2023 and accounting for more than 10% of total sales."
Although we may not witness exponential sales growth, there will be an exponential increase in the number of EV models available. Over the next two years, consumers will have more than 70 EV options to choose from.
The slow rollout of nationwide infrastructure to support EV drivers and high prices will continue to hinder sales growth.
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Fortunately, prices are gradually decreasing. Last month, the average price paid for a new EV was $50,789, which is 17% lower compared to last December's average.
The rules surrounding federal EV tax incentives are becoming stricter each year until 2028. This year, new regulations caused many EVs to lose access to $7,500 in federal tax rebates. However, they may regain access as automakers source necessary minerals from the U.S. or certain trade partners to comply with the law.
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Furthermore, the rules now allow buyers to use their tax credit as a down payment in 2024 instead of waiting to claim it on their taxes. This shift could potentially encourage sales of the qualifying EVs. It's worth noting that many vehicles that don't initially qualify for the tax credit may still qualify for lease options.
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This story was originally published on KBB.com.