Vehicle sales in the U.S. experienced a nearly 5% increase from January to March, indicating robust buyer activity despite elevated interest rates. However, the growth of electric vehicle (EV) sales decelerated during the first quarter due to concerns among mainstream consumers regarding limited range and insufficient charging infrastructure.
Major automakers, disclosing U.S. sales figures on Tuesday, collectively sold close to 3.8 million vehicles in the initial quarter compared to the previous year, translating to an annualized sales rate of 15.4 million.
As dealership inventories approached pre-pandemic levels, auto manufacturers were compelled to slash prices. According to J.D. Power, the average sales price in March stood at $44,186, marking a 3.6% decrease from the previous year and the steepest decline ever recorded for the month.
The company also noted that automaker incentives surged in March, increasing by two-thirds compared to a year earlier, totaling approximately $2,800. This uptick included a rise in lease offers, which J.D. Power anticipated would constitute nearly a quarter of retail sales last month, up from 19.6% in March 2023.
Despite the overall sales growth, EV sales only rose by 2.7% to slightly over 268,000 units during the quarter, significantly lower than the 47% surge observed last year, which drove record sales and a 7.6% market share. This slowdown, spearheaded by Tesla, underscores automakers’ concerns that their pivot towards attracting EV buyers may have been premature. Consequently, the EV market share of total U.S. sales dipped to 7.1% in the first quarter.
Edmunds Director of Insights Ivan Drury noted that the initial wave of EV enthusiasts and eco-conscious consumers has largely been tapped, leaving automakers to contend with a more hesitant mainstream audience. Drury highlighted prevalent apprehensions regarding charging infrastructure, battery longevity, and insurance expenses.
Cox Automotive Chief Economist Jonathan Smoke cautioned that it seems the industry has already reached its spring sales zenith, with consumers anticipating a Federal Reserve interest rate reduction later in the year.
