Driving EV Demand: 2024 EV Tax Credits, New Models and Affordability

EV demand is rising in the U.S. due to multiple factors. As more consumers 1) understand the impact of internal combustion engine (ICE) vehicle purchases on the environment, 2) recognize fuel and maintenance cost savings, and 3) realize that incentives and tax credits are easier to redeem, barriers to purchasing EVs are lower than ever before.

Consideration 1: EV Sales in the U.S. Climbed in 2023

The shift toward electric continues as total new vehicle purchases include steady growth of EVs.

In 2023, combined sales of hybrid vehicles, plug-in hybrid electric vehicles and battery electric vehicles (BEVs) rose to 16.3% of total new light-duty vehicle sales in the United States, according to data from auto analyst Wards Intelligence. (For comparison, in 2022, the number was 12.9% of total sales.)

Vehicle manufacturers continue to feel disruptions from semiconductor chip shortages, which likely affected the quantity and mix of vehicles available. However, U.S. sales of hybrids, plug-in hybrids and BEVs reached their highest share of total light-duty vehicle sales in the second half of 2023 at 17.9%. In fact, 2023 EV sales were higher than 2022 levels for every month of the year.

EV sales are still projected to rise in 2024. But EVs are in an interesting stage right now—innovators and early adopters have bought in, however, mainstream buyers may be slower to convince. Sales may reflect this as the adoption curve goes through its normal cycles. Some may find it easier to step into a plug-in hybrid electric vehicle (PHEV), as it occupies the middle ground between gas-powered vehicles and EVs. EV interest continues to grow due to increased model option availability and more popular size classes (like crossover vehicles).

Consideration 2: EVs Will Become More Affordable as Raw Costs Drop

As the costs of source materials like lithium, nickel and cobalt decrease, car manufacturers are dropping EV prices accordingly. EV prices will continue to drop as battery technology improves, the market gains efficiencies and economies of scale are leveraged. Goldman Sachs reported that battery prices should decrease by 40% by 2025. Ford also announced plans for a new type of battery manufacturing facility in Michigan (production projected to begin in 2026) with goals to lower EV battery prices.

Batteries are nearly 90% cheaper today than they were in 2008, according to the U.S. Energy Department. “Batteries can make up as much as 40% of the cost of the vehicle,” Valdez Streaty said. “We’re going to see battery prices continue to drop … so I think we’re going to start to see this closing near that price parity.” Many manufacturers are looking for cost savings by designing multiple vehicles on shared battery and software platforms, including GM and Nissan, among others. EVs will continue to become more affordable to a larger market share of buyers than ever before thanks to more attractive price points.

Consideration 3: 2024 Electric Vehicle Tax Credits Act Like Instant Rebates

Beginning January 1, 2024, EV buyers can transfer the federal EV clean vehicle tax credit to a qualified, participating dealer when purchasing, turning the credit into an immediate discount. At the time of sale, a seller must give you information about your vehicle's qualifications. Sellers must also register online and report the same EV purchase information to the IRS. If they don't, your vehicle won't be eligible for the credit.

Here is a handy list of federal tax incentives to keep in mind:

• New Plug-in and Fuel Cell Electric Vehicles Purchased in or after 2023: Get a tax credit of up to $7,500
• Used Plug-in and Fuel Cell Electric Vehicles Purchased in or after 2023: Get a credit of up to $4,000 for used vehicles purchased from a dealer for $25,000 or less
• New Plug-in and Fuel Cell Electric Vehicles Purchased Before 2023: Get a tax credit of up to $7,500
• Electric Vehicle Recharging Property Placed in Service in or after 2023: Save up to 30% off the cost of installing EV charging

Businesses and tax-exempt organizations that buy a qualified commercial clean vehicle may qualify for a clean vehicle tax credit of up to $40,000 for vehicles over 14,000 pounds under Internal Revenue Code (IRC) 45W. Each of these purchasing scenarios has specific requirements. Review carefully to ensure eligibility. Edmunds offers an excellent EV Tax Credit chart to help understand qualifications.

Consideration 4: 130+ Available EV Models Projected by 2024

By 2024, more than 130 EV models are projected to be available for U.S. consumers, compared to 2010 when only two models were available. Manufacturers added 20 new BEV models during 2023 (mostly in the second half) for a total of 70 BEV models at year-end out of 459 unique light-duty vehicle models. Half of the new BEV models were crossover vehicles, a market segment that has more than doubled its share of total light-duty vehicle sales since 2014. You can use our EV Comparison Tool to learn more about available models and find a good fit for your lifestyle.

Save As You Drive

Now is a great time to stack tax credits to get into a new EV. And when you drive an EV, charging your car is equivalent to paying $1/gallon of gas. Drivers can also take advantage of lower rate charging times. For example, Ameren Missouri offers Evening/Morning Savers or Overnight Savers rates to help save while charging overnight. Wondering how much you can save by driving electric? Use our savings calculator to total your potential fuel savings over time.

Meet with one of our EV Dealer Partners to find the right EV for your needs and budget. Keep reading our most frequently asked questions about EVs to learn how they can fit into your lifestyle.

* https://www.nrel.gov/news/program/2023/building-the-2030-national-charging-network.html