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James Bryant

Falling sales spark electric vehicle price war

by James Bryant | Dun & Bradstreet Editor

June 14, 2013 | No Comments »

LeafBIZMOLOGY — Tepid US sales of electric vehicles (EVs) have prompted a price war that some fear may further erode acceptance of the vehicles in the long term. Early adopters of the technology have already purchased an EV, and the industry is having trouble attracting a wider group of buyers.

Despite what appears to be a slowdown in demand for EVs, sales of Nissan’s Leaf picked up after the company slashed the price 18 percent. Ford, Toyota, Honda, and Mitsubishi have also cut prices on their EV offerings in the hope of moving inventory. But industry watchers warn that while a price war might help move the metal in the short term, it comes at the expense of understanding the EV’s natural market demand. Experts fear that some buyers might gravitate toward EVs based on the low price, have a bad customer experience, and then be soured on the EV market segment for years, if not a lifetime.

Sales of EVs have been hindered by moderate gasoline prices, worries about range, concerns about the technology, and an overall public perception that gasoline-electric hybrids offer a green option without the drawbacks of locating recharging stations and the EV’s range limitations. The result of lackluster consumer acceptance has been that supply has surpassed demand. The only way to counter that is to drop the price. Price reductions are also a key way to compete in an increasingly crowded market when consumer perceptions of quality are more-or-less the same across the range of vehicles available.

The price slashing began in January when Nissan reduced the price on the Leaf from $35,200 to $28,800. Mitsubishi and Toyota soon followed suit. GM priced its Chevy Spark EV low from the get-go, and Ford has cut the price on its Focus EV.

While some contend that a price war could hurt EV acceptance in the long run, there are two factors that could make the war short-lived — a rise in gas prices combined with a $7,500 federal tax credit. If gas prices rise, which they almost certainly will, more consumers will be more likely to consider an EV. If the tax credit remains in place, that will offer another incentive. If demand rises, manufacturers will be better positioned to compete on technology, vehicle range, and safety, instead of just the price.

But for the time being, if you’ve been sitting on the fence about buying an EV, in the parlance of the car commercial, now’s the time to save!

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Photo by Mariordo59, used under a Creative Commons license.

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