Electric vehicles are continuing to rise in popularity, and their market share in the U.S. has now reached 8.5%, which is more than triple the level in February 2021.
EV sales have increased in 2023 partially due to new tax credits that can make qualifying cars up to $7,500 more affordable. Tesla also announced major price cuts in January. Ford then followed a few weeks later, slashing sticker prices for models of its Mustang Mach-E SUV.
The combination of the tax credits and lower prices have spurred buying activity. In February, EVs accounted for 8.5% of all new vehicles that were leased or sold, which was a record high, according to a new report from J.D. Power.
That figure compares to a 4.9% market share for EVs for February 2022 and a 2.4% market share in February 2021.
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What experts say
New model launches and increased production of EVs are also contributing to the growth in adoption by drivers. This trend will almost certainly continue in the years ahead as major automakers prioritize their EV businesses.
- “The EV landscape is changing quickly,” Elizabeth Krear, vice president of the electric vehicle practice at J.D. Power, said in the report. “Newer models are bringing in more mainstream, first-time buyers who expect build quality and dependability to be on par with [internal combustion engine] vehicles.”
- For now, Tesla is still the dominant player in the EV market, and its price cuts appear to have had the intended effect of increasing sales.
- In the first quarter of 2023, Tesla “is likely to see nearly 40% gain in sales over last year and last quarter,” Charlie Chesbrough, senior economist at Cox Automotive, said during a presentation Monday.
- “The new kids on the block, Rivian and Lucid, are now starting to have significant sales volume, and they are headed even higher from here,” Chesbrough added.
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The next step
This week, the Treasury Department will release much-awaited guidance on battery requirements for vehicles to be eligible for the EV tax credits, according to Reuters. Experts say some vehicles that have been eligible to date could become ineligible when that happens.
- The law that governs the tax credits stipulates that half of the tax credit ($3,750) is contingent on a percentage of an EV’s battery minerals having been extracted or processed in the U.S., “or a U.S. free-trade agreement partner or recycled in North America.” Eligibility for the other half of the credit will depend on where the battery components are manufactured and assembled.
Bottom line
While stricter rules around the tax credits could be a setback for EV sales, all signs indicate the EV market share will increase in the long run, and the strong start to 2023 is an encouraging sign for the industry.
How long will it take for EVs to become the norm? Seven states think that future is not so far away and are in a pact to ban sales of new gas-powered cars after 2035. Maryland was the latest to join, in mid-March.
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