As Americans experience continued pain at the pump due to high gas prices, some are hoping to make the switch to electric vehicles. But, with prices on the rise, buying an electric vehicle just isn’t affordable for many. The average price of a new electric vehicle is now $66,000, up 4% from the previous month and up 14% from last year, according to Kelley Blue Book estimates.
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“The average price for a new electric vehicle … is well above the industry average and more aligned with luxury prices versus mainstream prices,” Kelley Blue Book reported in a recent news release.
What Needs To Happen for EV Prices To Decrease
“Prices of cars were affected by the global crisis and damaged supply chains,” said Matas Buzelis, auto expert at carVertical. “EVs may become a little cheaper when the crises end.”
The restoration of supply chains may cause a small drop in EV prices, but other factors will lead to bigger drops down the line.
“The EV market is still very much in its infancy in terms of its business lifecycle — just 5% of all new car sales are currently electric vehicles,” said Tim Prescott, founder and editor of the automotive news site Certainly Cars. “But, two factors will likely lead to a price drop quite soon.”
The first is that more manufacturers will introduce new EV models into the market.
“The extra supply from multiple sources will naturally regulate prices as customers will have more choices while manufacturers compete for their business,” Prescott said. “Second, as with any product that is mass-produced, manufacturers will develop efficiencies over time that will improve upon the design and reduce the cost of production, especially regarding battery optimization.”
Due to increased competition, car companies will pass these savings on to consumers to entice buyers, he said. As it becomes cheaper to manufacture EVs, car companies will begin selling EVs at lower price points.
“We need EV makers to shift focus to more mass-market, affordable cars with an MSRP under $35,000,” said Michael Beauchamp, CEO of GO, a subscription car service. “We’ve hardly seen any to date, which drives up the average EV price.”
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When Will EV Prices Drop?
Prescott predicts that EV prices will start dropping in the next few years, with even bigger decreases within the next decade.
“Currently, there are about 50 EV models available in the U.S. out of the roughly 550 total models on sale,” he said. “But many manufacturers have been quite aggressive with their EV model roadmap, with some brands like Volkswagen aiming to have EVs make up 50% of their sales by 2030 and luxury makes like Bentley and Cadillac looking to go fully electric by 2030.
“Therefore, if we factor in the extra supply with the time it will take to gain some production efficiencies,” Prescott said, “I expect to see prices to start slowly dipping by 2025 and see a significant price drop by 2030.”
Will EV Prices Ever Be on Par With Traditional Gas Vehicles?
“There is no question that prices for EVs will eventually undercut traditional gas-powered cars since manufacturers will be investing more into EV development and, in many cases, eliminating investments into their gas engine departments altogether,” Prescott said. “Essentially, the cost to manufacture gas-powered cars will remain stagnant while EVs will only get cheaper due to new innovations and improvements in technology.”
Prescott also believes that all mainstream vehicles will be electric in the future.
“I expect that the remaining gas-powered cars on the market in the future will only be specialty cars, such as sports cars,” he said, “which will cost more to build due to their smaller production scale and lack of production improvements compared to EVs.”
Prescott believes this shift could happen within the next decade.
“I expect to see this reversal in prices by 2030,” he said, “when most manufacturers will be able to benefit from a full decade of investments into their EV programs that will surpass their gas-powered technology.”
It’s also worth noting that even before this happens it’s likely that a car owner will pay less to have an EV car than a gas-powered car over the lifetime of the vehicle.
“It’s important to keep in mind the total cost of ownership of EVs vs. ICE (Internal Combustion Engine) vehicles when comparing the two,” said Kevin Roberts, industry analyst with CarGurus. “EVs will have cost savings on electricity versus gas, government incentives and on maintenance that could offset a higher upfront list price.”
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