Major discounts on domestic brands, EV interest dips, consumer sentiment toward Chinese EVs

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And good news — it’s making a comeback. Why? I break it down into 3 reasons.

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— CDG

1. Major discounts on domestic brands ahead of Memorial Day

Top line: Inventory shortages are easing up, and outgoing 2023 model-year vehicles are sitting on dealer lots at pre-pandemic levels, leading to meaningful discounts for Memorial Day weekend. 

By the numbers: 

• Inventory: The share of 2023 model-year vehicles on dealer lots is 6.8%, almost mirroring the pre-pandemic (2019) share of 6.7%.

• Discounts: The $4,147 average discount on 2023 models is just $453 less than it was in 2019 when discounts on outgoing model year (2018) vehicles were $4,600.

• Financing APR: Over 26.9% of financed 2023 cars secured an APR of 1.99% or less, compared to just 4.1% for 2024 models.

Key quote: “Supply chain disruptions and limited inventory left little to be excited about in summer holiday car shopping the past few years, but discounts on outgoing model year vehicles this Memorial Day weekend are a bright spot for consumers in an otherwise challenging market,” said Jessica Caldwell, Edmunds’ head of insights.

Domestic brands lead the charge for the most discounts:

• 52.6% of Dodge listings are 2023 models, and the average discount is $6,753.

• Chrysler also has a large share of 2023 listings at 38.4%, with an average discount of $6,252. 

• Buick is trying to offload their share of 2023 models (17.6%) by offering discounts of $4,256.

• Japanese car companies Mazda, Toyota, Subaru, and Honda have tiny shares of 2023 vehicles — 0.8% or lower. Discounts for all four brands falling under $1,500. 

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2. Consumer interest in EVs declines from last year

Big picture: EV sentiment is cooling as affordability concerns and charging woes hit the brakes on consumer enthusiasm.

This is a big change. Since 2021, J.D. Power has tracked consumer interest in EVs. For the first time, new car buyer interest dropped from the previous year.

• Only 24% of car shoppers say they're "very likely" to consider an EV, down from 26% in 2023. Overall interest ("somewhat likely" or "very likely") also dropped to 58% from 61%.

Zooming in: Attitudes toward charging infrastructure haven't faded – 52% of non-EV buyers cite a lack of charging stations as a dealbreaker (up 3% from 2023).

What else is holding consumers back? Fuel prices are lower year-over-year. Inflation is persistently high. Interest rates are elevated. And, there is limited growth in model availability.

Plus, there is still a meaningful knowledge gap when it comes to EV incentives. “approximately 40% of shoppers say they do not have a solid understanding of such incentives,” said Stropp. Yet, when consumers do have an understanding of the incentives available, they are more likely to consider an EV.

Digging deeper: 

• Younger Gen Z and Gen Y shoppers, typically more EV-friendly, are feeling the pinch of affordability. Their "very likely" consideration dropped 2% and 5% points, respectively, compared to 2023.

• Drivers with longer commutes (46 to 60 minutes each way) are less likely to consider EVs now. 24% of respondents were  "very likely" to consider EVs, down 13% compared to last year). Charging and range anxiety are likely playing a role here.

• Shoppers looking to add a new vehicle to their household are more open to EVs (68% "overall likely"). However, those relying on a single car are less enthusiastic (47% "overall likely"). The flexibility of a second car helps alleviate range and charging concerns.

The main point is this: Interest rates are high. But, there needs to be better affordability, charging infrastructure, and model availability to boost consumer demand. All signs point to a slower rate of EV adoption, but U.S. market share of EVs continues to grow year-over-year. 

As consideration drops, will there be declines in EV growth, or are these ups and downs typical when adopting new tech? Let me know your thoughts in the comments.

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3. U.S. consumers warming up to the idea of Chinese EVs

At a glance: The potential arrival of Chinese EVs in the U.S. has sparked a heated debate. While a lot of the political rhetoric suggests strong opposition, a new survey reveals a surprising level of openness to Chinese EVs among U.S. consumers. 

The findings: 

• The survey found that 36% of respondents would consider a Chinese EV, with 76% of those under 40 expressing interest. Millennials and Gen Z are particularly open to the idea.

• But for folks over 60, consideration drops to 26%.

• A key driver of this openness is affordability. Chinese EVs are perceived as offering features and technology at much lower prices, appealing to cash-strapped younger buyers.

• But, data privacy and cybersecurity concerns remain a significant hurdle. Even among the under-40 crowd, 68% expressed worries about these issues.

The roadblock: The Biden Administration's 100% tariff on Chinese-built EVs goes into effect Aug. 1. Making it highly unlikely for Chinese brands to break through to the U.S. market.

Mexico as a backdoor? Some Chinese brands like BYD may explore building factories in Mexico to avoid tariffs, but this approach faces opposition from U.S. officials.

• BYD recently launched a hybrid pickup truck in Mexico.

The intrigue: The survey suggests that if Chinese EVs were built in the U.S., all age groups, including seniors, would be more open to them.

The future is electric (and maybe Chinese?)

While political roadblocks exist, research firm AutoPacific suggests it's a matter of "when" rather than "if" Chinese EVs arrive in the U.S. 

“Younger generations of shoppers are clearly aware of the enticing products Chinese automakers are cooking up overseas,” said Robby DeGraff, AutoPacific’s Manager of Product and Consumer Insights. “It’s only a matter of “when” they’ll be able to get their hands on them.”

• Today, Kia launched its much-hyped electric SUV, the EV3.

• Jeep will start taking reservations for its first all-electric vehicle, the Wagoneer S, on May 31.

• Any significant reduction or a rollback of the Inflation Reduction Act’s support for EVs would benefit China, according to General Motors board member Jon McNeill.

• China signaled it's ready to unleash tariffs as high as 25% on imported cars with large engines, as trade tensions escalate with the U.S.

• A California bill would require new cars to beep at speeding drivers.

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• Interested in how EVs work at the wholesale level? Plug is looking to fill two business development roles.

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Thanks for reading everyone.

— CDG