Historically, new technology is expensive and becomes less expensive with time. Being an early adopter of something interesting and unique might be dangerous because you know you’ll pay extra to be one of the first to acquire the shiny new item and that people who come along after you will probably get a better deal. Being an early adopter is also a game of luck since occasionally a new product just doesn’t perform as advertised.
An intriguing example is electric vehicles. They both serve as excellent examples of these conventions and, in some respects, flaunt them, as evidenced by the past ten years.
For instance, some electric vehicles have increased in price while others have decreased in price.
Notably, Tesla has increased prices by several thousand dollars or more throughout its portfolio in 2022, blaming material shortages and giving the impression that additional price hikes may follow. When EV startup Rivian announced a price increase in March, even for vehicles that customers had already ordered, the firm made headlines. However, a few days later, the company changed its mind and declared the previously agreed-upon pricing for existing orders would be respected.
However, in the summer of 2022, Nissan, Chevrolet, and Hyundai all reduced the cost of their entry-level EV cars. The standard 2022 Chevy Bolt, for instance, is nearly $10,000 less expensive than the 2018 Bolt. In the meantime, the price of the Hyundai Kona EV subcompact crossover was reduced by a few thousand dollars in order to remain competitive when newer and nicer Hyundai EVs entered the showroom. It’s important to note that these price reductions for specific EV models occurred during a summer with historically low new car inventories, which not only limited the availability of sales and incentives but also prompted dealers across the nation to add “market adjustment” surcharges to each vehicle in an effort to maximise profits. (That’s standard procedure with high-profile, limited-edition automobiles, but not what the majority of consumers would anticipate when purchasing, example, a Subaru Outback.)
So, while consumers of some tried-and-true vehicles, like the Chevy Bolt, benefit from lower prices than before, a newcomer like Rivian has raised prices before even having a chance to develop a following of devoted customers. Again, the point is that the market for electric cars defies accepted norms.
What makes electric vehicles still so expensive, then?
Because Batteries Cost a Lot
Electric cars are made possible by batteries. The largest and most important part of an EV is its battery. Battery costs are high. EVs are hence pricey. This line of thinking is challenging to challenge.
Except for the fact that battery technology is actually becoming more affordable. The average total cost of an EV battery has decreased by 80% over the past ten years. Everyone anticipated that batteries will become more affordable over time because new and developing technologies usually do. When production becomes lucrative and is scaled up, the original investments in research, design, and possibly some trial-and-error will be recouped. During this process, prices typically decline so that the businesses can sell more products. In the early years of widely available electric vehicles, auto industry analysts and pretty much everyone else projected that as batteries became more affordable, so will the vehicles. Except for the aforementioned examples (Chevy, Hyundai, and Nissan) and a few other outliers, that has been shown to be inaccurate. Overall, the cost of a new electric automobile increased by 80%, even as the cost of batteries decreased. Again, this demonstrates how electric automobiles are independent of conventional wisdom.
However, even as battery prices decline, they remain high. The AutoZone battery under the hood of a typical gasoline-powered automobile is nothing like the batteries that make electric cars viable. Additionally, automakers are constantly working to improve these batteries, which calls for ongoing investment. An EV battery can be improved in a variety of ways. The main concern with electric cars is range, or how far they can go on a charge. However, consumers also want faster charging batteries, ones that can give more power to increase acceleration, and ones that are integrated into the car without obstructing passenger or cargo space. Yes, it would likely be significantly less expensive than before if the first-generation Nissan Leaf, widely regarded as the first affordable mass-market EV, was still being supported by the electric vehicle market.
Keep in mind that batteries are particularly vulnerable to problems like the pandemic-caused lack of rare minerals and semiconductor chips, and that the subject is so complicated that it deserves a separate article. From the year 2020 onward, nearly everything has increased in price, including batteries.
Due to the high cost of luxury and performance
It seemed difficult to envision an electric Ford F-150 pickup truck that is as capable as a gas-powered vehicle in the early days of the Nissan Leaf, but the F-150 Lightning is just that. A mile-long list of high-end amenities and a magnificent look make it nearly a luxury truck on top of all that. Compared to an entry-level gas F-150, the 2022 Ford F-150 Lightning starts at about $40,000 for what amounts to a basic work truck configuration. However, Ford is aware from decades of F-150 sales that the majority of buyers will spend money for at least a mid-range trim level, potentially adding tens of thousands of dollars to the sticker price. That is but one illustration of how an electric vehicle can appear to be very pricey.
Currently, all major automakers, including Ford, Hyundai, Toyota, Honda, Subaru, and others, offer at least one fully electric vehicle, with more on the way. These popular EV models are generally competitively priced… with one another.
Luxury automakers are also expanding their EV product lines, which is a promising development for these businesses because they can charge even higher prices. Every time an automaker introduces new technology, it usually begins with the most costly models before trickling down.
It’s a particularly wise strategy when it comes to electric cars because automakers can promote their improved performance with upmarket style and features.
Last but not least, electric car manufacturers like Tesla and Rivian may currently charge pretty much whatever they want for their high-performance luxury EVs. However, Rivian has shown symptoms of following Tesla’s lead by increasing prices outside of model-year adjustments. These adjustments pile up: in June 2022, the entry-level Model 3 from Tesla cost nearly 25% more than it did just one and a half years earlier.
Since these automakers are sufficiently distinct from established automakers to make it difficult to categorise them as competitors, they lack any gas models to serve as a price point for direct comparison.
Because Automobiles Cost A Lot
The average cost of an electric vehicle was nearly $18,000 higher as of July 2022 than the average cost of a gas-powered vehicle. While not trivial, it’s important to note that gas cars are also pricey.
There are several causes for this, but supply and demand will be the main one in 2022.
The wait between placing an order for a new car and getting to drive it is notoriously long for some automakers, including Tesla. That’s because supply cannot keep up with demand. Customers who really want a Tesla are forced to accept what seem to be arbitrary price increases because Tesla simply cannot produce cars rapidly enough. This issue is not exclusive to Tesla. Even the Hyundai Palisades and the Kia Tellurides will be notoriously tough to purchase in 2022. But EVs aren’t till cars become more affordable.
