An interesting thing happened in the world of electric vehicles a couple of weeks ago. Chevrolet made an announcement, and it was the opposite of what I expected. They revealed the price points for the 2023 Bolt EV and Bolt EUV, and they clocked in with starting MSRPs of $26,595 and $28,195 respectively. Those represent price cuts of more than $5,000 compared to the 2022 models. In a time of high inflation, disrupted supply chains, and general economic uncertainty, Chevrolet is absolutely slashing the price point for its most well-known electric vehicle.
One Car That’s Getting Cheaper When It Seems Everything is More Expensive
I want to explore a few aspects of the EV landscape at the moment, but first a disclaimer. I own a 2019 Chevy Bolt, and I’ve loved driving it these last several years, even with its troublesome battery recall. I’m certainly biased here, but I don’t get any commissions if this post convinces you to finally take the EV plunge. Read on worry free!
The $26,595 MSRP for the Bolt EV seems very calculated to me. When you compare it to the 2022 Nissan Leaf (full disclosure - I used to drive one of those as well), Chevy has now undercut the $27,400 starting MSRP for its chief competitor. It seems to me that they wanted to make clear to customers that the Bolt not only goes farther (an estimated 259 miles per charge for the Bolt compared to the 149 for the Leaf’s cheapest build-out), but costs less as well. It’s good, old-fashioned affordability competition, which is a great thing for the industry.
There’s another layer to the story here, however. For the 2022 model, the starting MSRP for the Bolt was $31,500. For 2021, the starting MSRP for the Bolt was $36,500. I’ll make the math easy for you - that’s a nearly $10,000 price cut in two years. That’s dramatic, and it begs a question - why?
The Role of Tax Breaks and Teslas in Explaining The Bolt Price Cuts
A couple of things are at play here. First, I think the price reductions have to be considered against the backdrop of the electric vehicle federal tax credit. This credit can essentially give purchasers of new electric vehicles a $7,500 rebate, but there are limits to which vehicles are eligible. Once a car manufacturer has sold 200,000 EVs, the credit begins to be phased out for additional EVs sold by that manufacturer. Tesla was the first car manufacturer to reach that threshold, and their tax credits were fully phased out by June 2019. General Motors, Chevrolet’s parent company, was the second (and still only other) company to hit the threshold. GM tax credits fully phased out in April 2020.
That tells me that the Bolt’s recent price cuts are intended to offset the fact that purchasers can’t claim the tax credit. GM used the tax credit to successfully introduce an affordable EV, and now it’s entirely up to them to keep their vehicles affordable. The recent pricing suggests that the tax policy here has worked - it successfully de-risked GM’s entry into the electric vehicle market place. Score one point for tax policy! (Another disclosure - I used to be a tax attorney, so I would be the type of person who celebrates when a tax policy goes according to plan).
The other thing at play, however, is the Bolt’s competition. At the beginning of this post, I called the Leaf its chief competitor, but that’s only true insofar as their relative price points go. The real competition is the Model 3, which is Tesla’s most affordable car (2022 MSRP of $46,190, for those wondering). The Model 3 was released in 2017, and it sold a meager 1,667 cars in the United States that year. Compare that to the Bolt’s 23,297 US sales.
But then Tesla got rolling (pun!). In 2018, the US Model 3 sales were 140,317 compared to 18,020 for the Bolt. In 2019, it was 161,100 vs. 16,419. In 2020, it was 206,500 vs. 20,753. Admittedly, Model 3 sales fell quite a bit in 2021 to 121,610, but they still crushed the 24,827 of Bolt sales that year. You get the idea - a large number of customers have been willing to pay the premium for a Tesla Model 3 compared to the Chevy Bolt.
An Electric Vehicle Revolution, and General Motors’ Race for Market Share
Viewed in that light, Chevrolet’s price cut could be a bit of a separation play. I’m speculating here, but they may be waving the white flag when it comes to competing with Tesla, and the price reduction could be about placing them in a more distanced price range. With a roughly $20,000 difference in starting prices, I would say that the Bolt and the Model 3 are now competing for a completely different group of potential customers.
It’s entirely possible at this price point that the Chevy Bolt will lose money for General Motors. It’s also entirely possible that they are willing to take that hit because they believe they can claim quite a bit of market share. Yes, they need to attract people back to the car after the challenges with their battery recall, but I think this is more about a long-term play for the company. I think they are trying to become the king of affordable electric vehicles, and they are trying to claim that mantle as quickly as possible.
That’s because we are on the cusp of an EV revolution. Just take a look at this guide from Edmunds on EVs - there are already a ton of options for buying electric! Add to that the Ford F-150 Lightning that started selling this year, and the impressive list of companies that have pledged to go all-electric in the future, and it’s easy to see the tide turning in favor of EVs. Heck, I felt like every other ad in the Super Bowl this year was for an electric vehicle!
If the Bolt can attract enough customers to its lower price point, it can become the incumbent for affordable EVs. I think that’s their goal, but it could be an all-or-nothing play for them. If sales continue to stay relatively flat, they might also have to admit defeat and restrict production and/or raise prices sooner than they plan to. More than any other EV, the Bolt is the one I plan to watch in the coming years.
P.S. - If you live in Georgia like me and this post has got you thinking about getting an EV for the first time, take a look at this incredibly useful toolkit on buying an electric car. It just launched on the Drawdown Georgia website, and keep an eye out for other climate change solution toolkits in the future!