One of the main barriers to mass adoption of electric vehicles is cost. EVs are just way too expensive, with average price hitting a record high of $66,000 earlier this summer. That’s disappointing, because the auto industry has always promised that prices would drop as EV battery packs could be produced more efficiently.
But even more disappointing is the pace at which electric car prices are rising compared to their gas equivalents. According to a recent analysis of the car shop database iSeeCarsEV prices rose 54.3 percent year-on-year, while gas-powered cars rose just 10.1 percent.
The reason why electric car prices have risen at such a staggering rate is multi-layered. There is a global chip shortage, causing huge production problems for the industry and drove vehicle sales down. And, perhaps counterintuitively, high gas prices have caused car buyers to pick up all the EVs they could find on dealer lots, leading to a sharp drop in inventory.
To determine the price growth of electric cars compared to conventional fuel vehicles, iSeeCars analyzed the prices of more than 13.8 million used cars sold between January and July 2021, as well as those sold during the same period in 2022.
They found that electric vehicle prices rose in January 2022, up 54.1 percent from the previous year, thanks to high gas prices driving demand for plug-in vehicles. Price increases for both EVs and gas vehicles declined in March, but while they continued to fall for conventional vehicles, they rose again for EVs and continued to rise into the summer.
Interestingly, the two EVs that saw the biggest price increases year over year were also two of the most affordable vehicles on the market: the Nissan Leaf and the Chevy Bolt EV. A used Leaf now sells for an average of $28,787, which is a 45 percent increase from the previous year. The Leaf is reportedly nearing the end of its life, with Nissan considering discontinuing the EV in the coming years. Meanwhile, the Bolt, which recently got a huge price discount, averages $28,291, a jump of 29.3 percent from 2021.
Tesla vehicles are up 19.2 percent on average, with the Model S seeing the biggest price increase of 27.5 percent to $83,078. The only EV to drop in price, according to iSeeCars, was the Porsche Taycan, which fell 3.5 percent to $138,033. This drop suggests there’s a cap on what car buyers are willing to pay for a used EV — even one with a desirable nameplate like Porsche.
Dealers have increased the price of a number of new EVs, especially those in high demand such as the Ford F-150 Lightning, GMC Hummer EV and Kia EV6. This has led to a cycle of angry customers, incite news stories about the outrage and abandonment of automakers scrambling to contain the consequences. Many of the most buzz-worthy models have sold out for the year.
More broadly, EV prices are rising against the backdrop of changing market conditions and rising raw material costs, especially for the key materials needed for EV batteries. Battery prices have been falling for years, but some experts predict that a sharp increase in battery minerals in the coming years could lead to an increase in cell costs by as much as 20 percent.
But this price increase may not last long for this world. According to iSeeCars executive analyst Karl Brauer, there are a number of positive developments on the horizon that could lead to a stabilization in EV prices.
The Inflation Reduction Act, just signed by President Joe Biden, includes a $7,500 tax credit for new EVs and a $4,000 credit for used ones (as long as they’re made in North America and primarily parts from the US and its trading partners). . There’s also a spate of new, more affordable EVs, such as the Chevy Equinox EV, which GM says will start at $30,000, and “millions” of cheaper models resulting from a GM-Honda partnership.
So while sticker shock will likely remain a major obstacle to mass adoption of EVs, it may not be the status quo for much longer.
“More and more affordable new electric vehicles are hitting the market, which means used EVs won’t be as new, especially if supply chain problems start to improve,” Brauer said in a statement. “While potential used car buyers will see significant price increases for EVs in the near term, it is important to be patient as used EV prices are expected to fall in the coming months.”