Automakers are slashing prices on electric vehicles and offering other financial incentives to lure cash-strapped buyers back to their dealerships.

According to a recent Wall Street Journal report, several major automakers, including Hyundai, Ford, and Tesla, are trying to clear the logjam of unsold inventories on their lots.

In addition to cutting prices, these automakers are offering cash rebates, cheaper lease deals, and low-interest rate promotions.

As of September, financial incentives on EVs averaged 9.8% of the vehicle’s sale price, according to Cox Automotive. That means an average EV selling for around $54,000 had nearly $5,300 in savings.

For all other vehicles, the average incentive was worth 4.9% of the sale price.

The steep discounts follow new rules limiting the number of EV models eligible for a $7,500 federal tax subsidy, which may have dissuaded certain buyers from buying their first battery-powered car.

Slowing demand forced Tesla to cut prices first, which had downstream effects on other EV makers.

“We’ve seen the price come down much quicker than we had expected,” Ford’s chief financial officer John Lawler said in an earnings call last month.

Analysts say discounts are an effective way to move unsold inventory, but they’re not a long-term solution.

“Is it sustainable forever? Absolutely not. They’re going to have to find a way to make these things cheaper,” said Jeff Dyke, president of car retailer Sonic Automotive.

Demand for EVs not as strong as expected

2023 is shaping up to be a record year for EV sales, with more than 1 million fully electric vehicles expected to hit American roads this year, according to Cox Automotive.

The problem? Demand has tapered off, and sales are growing less than expected.

By October, it took an average of 97 days for dealers to clear their EV inventory, down from a peak of 111 days in July but well above the 52- to 58-day average for gasoline-powered cars.

Last month, Honda and GM scrapped a $5 billion joint venture to bring affordable EVs to market. Honda admitted that current market conditions don’t justify the massive investment.

“I think there was a miscalculation about demand and how much EVs would be coveted,” Joseph Yoon, an Edmunds analyst, told The Wall Street Journal.

“There’s so many advantages to a battery electric vehicle, but there are certain things that are slowing people down,” said Tim Kuniskis, CEO of the Ram auto brand.

Those reasons include cost, limited travel range, and a lack of public charging infrastructure. Americans already have enough on their plate to decide whether to transition from a reliable gas-guzzler to a battery-powered vehicle.

Consumers face difficult choices

Consumers spent big this year on discretionary items (things they enjoy but don’t actually need), but there’s reason to believe those days are numbered.

A recent survey of Americans conducted by CNBC-Morning Consult found that 92% plan to cut back on spending. According to the Conference Board, holiday spending is also forecast to drop this year.

With higher interest rates, reduced savings, and more debt, consumers are looking for more economical options. And that could discourage them from purchasing an electric vehicle, despite the steep discounts.

“A large number of people are living paycheck to paycheck, and with a lot of debt, they have got credit card debt, mortgage debt,” Tesla CEO Elon Musk said in an earnings call last month