Despite initial excitement and anticipation surrounding electric vehicles (EVs), carmakers in leading western markets are facing weaker-than-expected demand from mainstream buyers. To counter this, they have significantly increased the range and scale of discounts offered on EVs. Sales and financial data compiled by HSBC indicates that carmakers are having to offer deals on battery models in order to clear inventory that previously had long waiting lists.
In October, the average discount in the UK was 11% below the recommended retail price, while in the US, discounts on EVs reached 10%. In Germany, where discounts were barely offered a year ago, companies are now cutting prices by about 7% to attract buyers. Rising prices, negative publicity, concerns about charging infrastructure and safety, political attacks, and cautiousness from mass market buyers have all contributed to a slowdown in sales growth. This is the first global slowdown in EV demand since sales took off three years ago, and it has raised concerns about the profitability of car companies.
However, the discounted prices have started to attract buyers. In the UK, two-thirds of new EVs sold are on offer or have heavily discounted interest rates for financing. In the US, discounts offered on EVs have tripled in the past year. In Germany, some carmakers are still offering up to a fifth off their best-selling models. Tesla has consistently lowered prices to support sales worldwide. These discounts have shown some positive impact, but there are concerns regarding the long-term pricing and profitability of the EV segment.
As carmakers struggle to convince a new wave of buyers to switch from traditional petrol or diesel vehicles, price and concerns over charging infrastructure remain major barriers. Higher interest rates have increased financing costs for consumers, and the price of EVs has risen faster than petrol cars due to the steeper fall in resale values. Furthermore, the winding down of purchase incentives in markets like the UK has made it challenging to generate retail demand.
Carmakers now face a difficult decision: sacrifice margins to meet EV targets or hold the margins firm, which could slow down the transition to electric and risk losing ground to other competitors, particularly Chinese manufacturers. Steeper price cuts have already been implemented for popular models, but government policies regarding EVs also play a significant role in shaping consumer attitudes and demand.
Frequently Asked Questions (FAQ)
- Why are carmakers offering significant discounts on electric vehicles?
- What is the average discount on EVs in the UK?
- How have discounts on EVs changed in the US?
- What are the major barriers to mass adoption of EVs?
- What is the impact of government policies on EV demand?
Car manufacturers are facing weaker-than-expected demand for electric vehicles from mainstream buyers. In order to counter this and clear inventory, they have introduced substantial discounts on EVs.
In October, the average discount on electric vehicles in the UK was 11% below the recommended retail price.
Discounts on electric vehicles in the US have tripled in the past 12 months.
Price and concerns over charging infrastructure are significant barriers to the mass adoption of electric vehicles. Higher interest rates and the increased cost of financing have made EVs more expensive for consumers.
Government policies regarding electric vehicles play a significant role in shaping consumer attitudes and demand. Conflicting or unclear policies can deter potential buyers.