Americans are still buying more electric vehicles (EVs) than they did a year ago, but EV sales are no longer accelerating. Market leader Tesla saw its market share fall significantly as more competitors gained traction in the first quarter.
Sales are still growing, but slowly
Americans purchased 268,909 electric vehicles in the first quarter of 2024, up 2.6% from the first quarter of last year. We bought more, so sales continue to grow. But they’re no longer growing at shocking rates – revenue in the first quarter of 2023 had exceeded that of 2022 by 46.4%.
In fact, electric vehicle sales declined quarter over quarter. Americans bought 15.2% less in the first quarter of this year than in the last quarter of last year. That’s not unusual – car sales are almost always faster towards the end of the year. However, this means that the electric vehicle market may calm down enough to follow normal fluctuations.
It’s “the first quarterly decline since the second quarter of 2020,” notes Stephanie Valdez Streaty, director of industry insights at Cox Automotive. Cox Automotive owns Kelley Blue Book.
Everything about electric vehicles is controversial, but the slow growth could be a sign that electric vehicles are becoming almost mainstream in parts of the country. Segment growth typically slows as volume increases.
Consumers follow a predictable curve when adopting new technologies. There is almost always an initial boost as early adopters get on board enthusiastically. Then sales growth slows as more skeptical consumers take a look at the technology and need to be convinced.
Tesla is losing ground
These early adopters chose Tesla as their brand of choice. The company has controlled most of the electric vehicle market for most of its existence. But it faces challenges as competition increases and the expected slower growth phase begins.
Tesla’s market share fell to 51.3% in the first quarter, down from 61.7% a year earlier.
Tesla sales in the U.S. fell 13.3% year over year – well below the typical double-digit growth that had become routine for the Tesla brand. The company introduced a popular new product before the start of the quarter – the Cybertruck. But it’s a low-volume model that’s unlikely to change declining sales.
This led to a rare share price decline in the first quarter.
CEO Elon Musk has made it his mission to tell investors that the company’s attempts to develop self-driving software are key to its future growth. But its misleadingly dubbed “fully self-driving” system has performed poorly in public tests compared to similar efforts from other automakers. Mercedes-Benz has received regulatory approval and started selling a more advanced system in some states.
Competitors win
Tesla’s loss was a gain for several competitors.
“As expected, Tesla sales took a hit, impacting overall market dynamics. However, some brands saw significant increases in electric vehicle sales, achieving over 50% year-on-year growth,” notes Valdez Streaty.
Nine manufacturers reported first-quarter EV sales growth of more than 50% year over year: BMW, Cadillac, Ford, Hyundai, Kia, Lexus, Mercedes, Rivian and VinFast. However, keep in mind that small numbers can make growth appear dramatic. VinFast, a Vietnam-based startup, sold just 921 cars last quarter, compared to just 110 in the first quarter of 2023.
Cadillac posted a 499.2% year-over-year increase in electric vehicle sales due to robust sales of its Lyriq SUV. At Mercedes, electric vehicle sales rose 66.9%. BMW reported a 62.6% increase in electric vehicle sales compared to the first quarter of 2023. At Audi, electric vehicle sales increased 28.8% year-on-year in the first quarter.
Prices are falling
In surveys and studies, consumers consistently say they need to improve three aspects of electric vehicles before they join early adopters and accelerate the sales curve: price, range and infrastructure.
Price movements occurred in the first quarter of 2024. The average transaction price for a new electric vehicle in the first quarter was $55,167, a decrease of 9.0% compared to the first quarter of 2023 and a decrease of 3.8% compared to the previous quarter.
Tesla led the way with price cuts. Tesla’s average transaction price was $52,315 in the first quarter, down about 13.5% year over year.
Many car manufacturers have followed Tesla’s example and reduced prices. The incentives – those discount dealers and automakers designed to support car sales – are increasing for every type of vehicle. However, growth is growing faster for electric vehicles as manufacturers follow Tesla’s lead and lower prices.
Leasing has also increased. In the first quarter, around 27% of all electric vehicles were leased – more than twice as much as in the previous year. Many electric vehicles are eligible for a $7,500 tax rebate when leased. Far fewer qualify if purchased outright.