Tesla Inc.’s TSLA aggressive price reductions throughout 2023 played a pivotal role in narrowing the gap between electric vehicles (EVs) and traditional internal combustion engine (ICE) vehicles, bringing the market closer to achieving price parity.
What Happened: According to Cox Automotive, the Elon Musk-led company’s strategic maneuvers triggered a price war in the auto industry. Consequently, competitors faced significant pressure, leading to a widespread decrease in EV prices throughout 2023.
By December, the average Tesla vehicle price had fallen to $50,051, closely approaching the average ICE vehicle price of $48,759. The broader auto industry followed suit, with the average EV price dropping to $50,798. This reflected a similar decline from the average EV price of $52,362 in November.
Cox Automotive attributed this reduction to Tesla’s price cuts, incentives, and the emergence of more affordable EV options in the market.
Teslarati reported on Cox’s insights earlier in the day.
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Inventory Factors: However, car manufacturers reported higher inventory levels for EVs compared to ICE vehicles. Dealers concluded the year with an average 113-day supply of EVs, a 92% increase compared to the average 69-day supply of ICE vehicles in December.
Notably, companies like Tesla and Rivian Automotive Inc. RIVN were excluded from this data due to their direct-to-consumer models, which maintain lower inventory levels.
Cox Automotive intends to release a more comprehensive EV report later this week.
Why It Matters: The average price of an electric vehicle in the U.S. is anticipated to become more affordable than that of a gas vehicle this year, as suggested by a recent study by the University of Exeter.
Already, the average price of an EV is lower than its combustion engine counterparts in China, Europe, and India, according to the report.
However, a tough economic environment may pose obstacles. In October, Ford Motor Co F announced a pause in its $12 billion electric vehicle funding, citing the high cost of EVs and customers’ reluctance to pay the premium. Even Tesla CEO Musk is worried about dwindling demand due to high EV costs amid a high-interest rate environment.
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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