In a recent piece on The Wall Street Journalwe learn that the prices of electric vehicles, like all vehicles, are skyrocketing:
“Overall, the average price paid for an electric vehicle in the US in May was 22% higher than a year earlier, at about $54,000, according to JD Power. By comparison, the average paid for an internal combustion vehicle increased by 14% over that period to about $44,400.”
Electric vehicle manufacturers blame the $10,000 price difference over gas vehicles on the rising cost of battery materials, especially rare earth minerals. Ford says its entire profit margin for the Mustang Mach-E has been wiped out, and other manufacturers are seeing similar problems.
We’ve always known that the cost of battery packs is the reason EVs cost more than ICE cars, despite having much simpler powertrains and better design flexibility, but just two years ago, prices were falling, with some experts predicting that the price of EVs would have fallen to that of gas-powered cars by 2024. Worse, they predicted that EVs would cost just $2,000 more than gas-powered cars this year, which clearly hasn’t happened.
Rosy predictions that EVs would be as affordable as gasoline-powered cars led many jurisdictions to place their legal bets on EVs. Countries and US states in succession have announced future ICE vehicle bans that would ban the registration of new fossil fuel vehicles after a certain date, usually between 2030 and 2040. they can all be modified or repeated if EVs aren’t affordable enough to mandate without overloading people.
So these price hikes should concern all of us because if price parity or near parity can’t be achieved a lot of the work to get EVs adopted en masse, not to mention the mandates, is all at risk. Battery material and refining industries need to expand massively if they are to lead to competitive prices, but we need to closely examine and address all of the other factors driving prices up.
In the short term, our economic troubles have one small bright spot for EVs: high gas prices. Automakers are currently having no trouble getting people to buy electric cars, especially since the cost of running their gas-powered cars is as high as ever before. Faced with high monthly gasoline or diesel costs, the higher price for an EV doesn’t seem so painful. However, this is no consolation for people who can’t afford an EV.
Even with parity, high prices can hurt all new car sales
Price parity is not the whole story. The total price of new and used cars can also threaten the future of electric vehicles in the short and long term, especially in places where wages are low.
Some recent vehicle purchases I have illustrated this quite well. It’s no secret that I’m not happy with my Nissan LEAF. I’d love to have a better EV with liquid cooling and better charging speeds for regional driving, and a little more room wouldn’t hurt either. But until recently I was “upside down” in the car because I was fooled by a dealer into paying too much for the car. Recent used car price spikes have put the value of my car slightly above what I owe now, so I thought it might be a good time to switch.
But when I started looking for a used EV, reality hit me. Used Teslas all cost over $40,000. New EVs usually cost upwards of $50,000 (assuming you can find one). The cheapest used EV I could find that wasn’t a conformance car went for $30,000 and I couldn’t get the dealer to budget over $400. Some better deals could be found on sites like Carvana, but every electric vehicle is marked “sale in progress,” so that was a dead end.
The only thing that could be an option would be a new Bolt EV or Bolt EUV, oddly enough. That’s only because Chevrolet offers them big factory premiums, which would put the price in the range I’d be willing to pay for it. But I have a great time finding a dealer willing to sell them for MSRP minus the incentives (which would still give the dealer a decent profit).
Instead, they’re counting on the high demand for EVs to allow them to basically steal the factory incentive. By hiding that GM offers discounts, many dealers sell the vehicles for MSRP and pocket as much as $6,300 in their own pockets. Are they in a rush to sell it to me for what is actually suggested retail price? Not at all.
If I tried to ditch a gas burner and trade it in for an electric car, I’d probably be in a much worse situation. I’m lucky that our family has another gas vehicle that we occasionally use for road trips, so I can get the cheapest EV on the market and still be fine when I need to go on a road trip. But if I only had one car I wouldn’t realistically consider trading it in for a Bolt of any kind (EV or EUV) as the 50kW max charge rate wouldn’t be realistic for longer periods in most cases. to travel.
Will this derail buying electric cars for lower-income people?
Now, I know that with enough inflation for long enough, employers will have to start raising wages to keep families from shopping for other employment options, but it’s pretty clear that the price of everything from food to gasoline to cars , is vastly higher than all the profits that people now make in wages.
If these prices, relative to income, for new and used EVs are permanent, I think it can be done. It’s going to hurt people, especially in poor states and regions. If someone at the bottom of the economic totem pole can’t afford anything but a used compliance car, EVs won’t be a realistic option for them. Thrifty folks at all income levels certainly wouldn’t waste time entertaining expensive EVs.
If this is a temporary situation and prices start to move back toward not just equity, but affordability, then EVs may still have the bright future we want and need.
Featured image provided by GM.
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