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Despite high interest rates, U.S. new vehicle sales grew nearly 5% in Q1, while electric vehicle sales saw a slowdown due to concerns over range and charging infrastructure.
U.S. new vehicle sales experienced a nearly 5% increase from January through March, indicating consumer resilience amid high interest rates.
However, the growth rate of electric vehicle (EV) sales decelerated in the same period, with concerns over range limitations and insufficient charging infrastructure deterring mainstream buyers.
Automakers, who disclosed their U.S. sales figures on Tuesday, reported the sale of close to 3.8 million vehicles in the first quarter, translating to an annual sales rate of 15.4 million vehicles.
As inventory levels on dealership lots approached those seen before the pandemic, automakers found themselves in a position where they had to lower prices.
According to J.D. Power, the average vehicle sale price in March dropped by 3.6% from the previous year to $44,186, marking the most significant decrease for the month of March on record.
Discounts offered by automakers in March surged to about $2,800, substantially more than the previous year, along with more available leasing options. J.D. Power noted an expected increase in leases, predicting they would make up nearly a quarter of retail sales last month, a rise from 19.6% in March of the prior year.
Electric vehicle sales saw only a 2.7% increase, reaching just over 268,000 units during the quarter, a stark contrast to the 47% growth last year that led to record sales and a 7.6% market share.
This slowdown, particularly notable for Tesla, underscores the industry’s concern about possibly advancing too swiftly in courting EV consumers. The market share for EVs dipped to 7.1% in the first quarter.
Ivan Drury, Edmunds’ Director of Insights, pointed out that the initial group of early adopters and environmentally conscious consumers has largely been tapped, leaving automakers to face a more skeptical mainstream audience.
Drury highlighted prevalent concerns among potential buyers about charging infrastructure, battery longevity, and insurance costs.
Cox Automotive Chief Economist Jonathan Smoke suggested that the industry may have already reached its peak sales period this spring, as consumers delay purchases in anticipation of potential interest rate cuts by the Federal Reserve later in the year. With auto loan rates averaging around 7%, high interest rates continue to be a deterrent.
Drury observed that more affordably priced vehicles tend to sell quicker than their pricier counterparts, with sales of larger and more expensive SUVs declining in the quarter due to budget-conscious consumers.
For instance, Chevrolet’s Trax small SUV saw sales soar, significantly outselling the entire Cadillac brand with 37,588 units sold in the quarter, starting at around $21,500.
While most automakers reported strong year-over-year sales increases for January through March, General Motors, Stellantis, Kia, and Tesla saw declines.
General Motors, the leading automaker in the U.S., reported a 1.5% drop in sales for the quarter, with Stellantis and Kia also experiencing decreases. In contrast, Toyota, Honda, Nissan, Subaru, and Hyundai reported sales gains, with Toyota and Honda noting significant increases of 20% and 17%, respectively.
Tesla’s global sales decreased by nearly 9%, attributed to production adjustments for the updated Model 3, shipping delays, and a power outage at its German factory. It’s estimated that Tesla’s U.S. sales fell by more than 13% in the first quarter.
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