Market Trends

Model Year 2023

2022 was another turbulent year for the automotive industry in the United States as continuing supply-chain issues and inflation in combination with rising interest rates led to another year of low sales. Domestic vehicle sales were down to 13.7 million compared to 15 million in 2021. General Motors reclaimed its long-held spot as the manufacturer with the most sales, 2.27 million vehicles with Toyota following closely behind with 2.1 million. These two automakers differ considerably in their approach to electrification. While GM sees fully electrified vehicles or EVs as the future, in 2022 only 2% of its sales were fully electrified. Toyota, in contrast, is focusing more on hybrid technology, where it sees considerable value, and between the Toyota and Lexus brands, about one-fifth of its sales had some level of electrification, largely hybrids. 

2022 was also another big year for policy developments. Recent and expected federal policy developments will boost eV sales and reduce emissions from gas-powered vehicles. The Inflation Reduction Act will reduce the purchase price of new EVs and plug-in hybrids (PHEV) by up to $7,500 and a new credit of up to $4,000 was created for used EVs and PHEVs. Whereas a previous EV tax credit was set up to expire after an automaker met a certain sales threshold, these tax credits expire entirely2032, regardless of sales. Tesla and GM had reached this sales threshold, so the new tax credits should help them sell more EVs. However, the tax credits have new restrictions and conditions. Half the credit will be conditioned on final assembly of the car in North America while the other half will be conditioned on meeting sourcing requirements for the materials used in the battery packs (these mineral-sourcing conditions are still being finalized). Many vehicles already qualify based on the assembly requirements, including the Ford F-150 Lightning, Chevrolet Bolt, Tesla Model 3, and Volkswagen ID.4. There are also income-eligibility requirements for the buyer and price caps for the vehicles to qualify. The United States could see greater electrification and lower emissions from internal combustion engine vehicles when the next round of greenhouse gas standards for light-duty vehicles are released later this year. These standards will start in model year 2027 and build off the model year 2023–2026 standard finalized in early 2022.

Electric Vehicles

Though not as many as in 2021, several automakers announced plans last year to accelerate the transition toward electric vehicles. Honda, for example, outlined its plan to go fully electric with hopes to reach 40% of new sales being electric by 2030, 80% by 2035, and 100% by 2040. Honda will also be relying on GM’s Ultium battery technology, not the first nor likely the last example of automakers partnering on battery technology and production. Hyundai announced that it is accelerating its EV ambitions with a new target of 1.87 million fully electric vehicles sold annually by 2030 and EV sales penetration of 58% of its total U.S. sales. Ford announced that it will reorganize, separating electric and internal combustion divisions to streamline operations and prepare for an all-electric future. 

Rising gasoline prices helped propel fully electric vehicle sales to an all-time high of 5.8%, a roughly 80% increase over 2021. Tesla continued to dominate the EV market, representing 65% of fully electrified sales. Ford followed at 7.6%, doubling its EV sales compared to 2021. The Tesla Y and 3 were again the best and second-best selling EVs in 2022, followed by the Ford Mustang Mach-E. Other vehicles from Tesla and Ford as well vehicles from GM, Hyundai, Kia, and Volkswagen make up the top 10. 2022 was the first time an electric pickup, the newly introduced F-150 Lightning, was among the top 10 vehicles sold after selling particularly well. The Rivian R1T electric truck also fared well. This could be a sign of things to come as more crossovers, SUVs, and pickup truck models infiltrate the electric vehicle market. 

2022 was a record year for battery and electric vehicle (EV) manufacturing investment. Automakers committed $73 billion in total funding, indicating how serious they are about electrifying their offerings over the next decade. Other major announcements in 2022 included news that startup Our Next Energy will spend $1.6 billion on a new plan in Michigan and supply batteries for BMW; Panasonic will spend $4 billion on a new plant in Kentucky; and a joint venture between LG and Honda will spend $3.5 billion on a new plant in Ohio. Domestic sourcing provisions in the recently passed tax credits will likely further increase investment in domestic EV and EV battery manufacturing over the next decade. Unfortunately, 2022 also marked the first time in over a decade that the average price of EV batteries increased. Prices rose 7% compared to 2021 due to overall inflation and rising prices for key battery minerals, in particular lithium, nickel, and cobalt. 

Internal Combustion Engines

The past few years have been record-breaking for EVs, but internal combustion engine (ICE) vehicles still comprise the vast majority of sales. ICE vehicles on average have not seen much fuel economy improvement in the past few years. Model year 2021 vehicles (the latest for which full data is available) had the same average efficiency as the prior year: 25.4 miles per gallon. Even so, there are plenty of highly efficient vehicles with internal combustion engines for drivers to choose from in variety of sizes and classes.

Automakers continue to invest in a number of efficiency-enhancing technologies for their ICE vehicles. Penetration of start-stop technology—which allows for the engine to turn off when the vehicle is idling, saving fuel—and hybrid vehicles, both forms of partial electrification, reached record highs again in 2022, with start-stop technology included in nearly 50% of all non-hybrid vehicles while 10% of all vehicles sold nationwide were hybrids. There is considerable variation between automakers in their use of start-stop technology, however. Some automakers, like Ford and Subaru, use it in over 80% of their vehicles while others, like Nissan and Mazda, don’t use it at all. For hybrid technology, Toyota and the major European automakers were the largest producers- at least 20% of those manufacturers’ vehicles were hybrids in 2021. Both technologies allow cars to limit gasoline usage and can improve fuel efficiency as a result.

Another technology that has rapidly increased in popularity is gasoline direct injection (GDI). Only available since 2007, it is now in over 50% of vehicles, including in 90–100% of ICE vehicles sold by Subaru, Mazda, BMW, Mercedes, Volkswagen, and GM. As the name suggests, in GDI engines gasoline is directly injected into the cylinder. This enables more complete combustion and greater efficiency and power from the motor. GDI engines are often outfitted with other fuel efficiency-enhancing technologies such as multi-valve and variable valve timing, which work together to increase power from the engine with less fuel. 

Other notable developments in engine design and technology are the usage of cylinder deactivation and an overall reduction in the average number of cylinders in ICE engines. Both developments reduce the amount of engine displacement, or the total volume of all the cylinders, which reduces the amount of gasoline that needs to be consumed. Cylinder deactivation reduces the number of cylinders being used at opportune times, therefore reducing displacement, and allows the engine to operate more efficiently. Use of cylinder deactivation has grown rapidly, and the technology is now used in almost 17% of vehicles on the market. The average number of cylinders used in ICE vehicles has also declined over time, with 4-cylinder engines recently replacing 6-cylinder engines as the most common size. One example of cars having fewer cylinders is the recent addition of a 6-cylinder version of the traditional 8-cylinder Jeep Wagoneer and Grand Wagoneer. The 6-cylinder versions reduce the amount of gasoline the engine consumes and increase overall fuel economy by 1–2 miles per gallon. 

Greener Choices Are Available to Everyone

When it comes to buying a new vehicle, the most environmentally friendly step for a driver is simple: they should evaluate their needs and budget, then look for suitable models with the highest green scores. Even though our top 2023 ratings go to vehicles with some form of electrification, all vehicle classes feature nationally available gasoline-powered vehicles that score significantly better than average.

Our Greener Choices table highlights top-scoring vehicles available in almost all major market segments. The list includes only cars with automatic transmission. In the past, manual transmission versions of vehicles on the Greener Choices list often had higher fuel economy, but this is less common today thanks to advances in continuously variable and automatic transmissions. The good news: anyone can find cleaner and more-efficient vehicles throughout the market. The database lists hundreds of vehicles beyond those listed in the Greener Choices table.

Buying green does more than fulfill a personal commitment to reducing pollution and protecting the environment. It sends a signal to manufacturers. As more consumers buy green, automakers will increasingly view environmentally-friendly design as a market opportunity rather than an obligation. They will be motivated to invest in better technology, leading to greener vehicles in the years ahead. 

The average car or light truck runs for 15 years or more thanks to increasing vehicle durability. Even if you don’t keep your new vehicle for more than a few of those years, the choice you make now will expand the options available to used-car buyers in the future. So instead of putting another gas guzzler on the streets, the greener choice you make today can help cut pollution for years to come.