Transition to full EVs has slowed
and hybrids may be the better choice

(December 19, 2023) SANTA MONICA, Calif.  — The car shopping experts at Edmunds say opposing market forces are expected to keep new vehicle sales relatively steady in 2024, forecasting that 15.7 million new cars will be sold. The forecast, tabulated from Edmunds data, represents a 1% increase from their estimate of 15.5 million new vehicle sales in 2023. EV market share is expected to tick slightly higher to 8% of total new vehicle sales in 2024, up from 6.9% in 2023 to date through November.

"2023 experienced improved inventory levels from pandemic-era lows combined with pent-up demand to deliver strong sales estimated up 12.7% year over year," said Jessica Caldwell, Edmunds' head of insights.

"While the year ahead holds the promise of further increased inventory and enticing deals that consumers have eagerly awaited, 2023's high interest rates are expected to linger, provoking conflicting market dynamics. Automakers specifically will weigh one other key consideration in 2024: Are they satisfied with this newly established supply-demand equilibrium, or are they willing and able to push sales volumes closer to pre-pandemic norms?"

Edmunds experts have put together their list of the three biggest industry trends they predict will shape the road ahead in 2024, along with some direct consumer shopping guidance.

New vehicle prices will plateau after an aggressive climb

    •    The COVID-19 pandemic spurred a series of significant vehicle price hikes, first from consumers leveraging low interest rates to buy larger, well-equipped vehicles and later from out-of-whack demand due to supply shortages. But Edmunds data reveals pricing has peaked, as improved inventory has driven incentives back into the market.

    •    Shoppers seeking options on the affordable side of the new vehicle market, however, will have a tougher time as those vehicles are selling quicker than their more expensive counterparts. According to Edmunds' days-to-turn data, vehicles transacting below $50K are selling more quickly (30 days) than vehicles above that threshold (47 days) — the reversal of a trend witnessed from fall 2020 through fall 2021.

    •    Consumer callout: Edmunds experts say 2023 models will be selling out sooner than expected as many automakers have rolled out 2024 models early and aggressively. Rather than end-of-year selldown searches, bargain shoppers should instead explore vehicles that haven't undergone a redesign in recent years or consider models within segments where direct competitors have received noteworthy updates.

EVs will continue to create disruption in brand loyalty

    •    Edmunds experts note mainstream-branded EVs continue to over index on transactions that include luxury vehicle trade-ins. In 2023, 13% of trade-ins for mainstream EVs were from luxury-vehicle owners, according to Edmunds data. In contrast, mainstream brands in totality typically only see 6% of trade-ins involving luxe vehicles.

    •    Regardless of mainstream vs. luxury, EVs are also capturing a more diverse set of brands involved as trade-ins. Year-to-date, new EV purchases involving a trade-in saw 59% of those trades come from another brand, while non-EV purchases involving a trade-in saw 48% of trades come from competitors.

    •    A lack of consumer brand loyalty creates opportunities for EV makers to win over buyers in the still-early stages of EV adoption, considered even more impactful given today's lower overall sales rates relative to pre-2020 levels.

    •    Consumer callout: With brands jockeying for pole position in the EV adoption race, shoppers ready to make the switch to electric should see plenty of incentives in 2024 even before tax credits kick in. As of November, EVs saw the largest discounts by powertrain at $2,326 below MSRP on average compared to an industry average of $1,006 discounted.

Hybrid sales share will grow further as automakers reevaluate electrification strategies

    •    Edmunds experts say that the transition to full EVs has slowed, and hybrids are the more comfortable choice for the majority of Americans seeking electrified options right now.

    •    According to Edmunds data, hybrid market share increased to 9.7% in November 2023 from 4.9% the year prior, representing a 99% growth. Over that same time period, EVs increased just 25% in share.

    •    Consumer callout: Hybrids are transacting more quickly and at less of a discount than both EVs and pure gas competitors, according to Edmunds data. If you're on the hybrid vs. EV fence and prefer leasing, Edmunds experts suggest EVs could be the way to go due to available inventory, discounts and rebates. But if you're a drive-it-until-the-wheels-fall-off shopper and are set on a hybrid purchase, you might be best off placing an order rather than scouring local lots in search of a strong deal.