The Future of EVs: Will They Ever Be Affordable?
The market welcomed several new relatively affordable electric vehicles in 2023 — a handful with price tags south of $30,000 — and President Biden’s Inflation Reduction Act renewed a $7,500 tax credit for some of the most popular models.
On top of that, nearly all major automakers now offer at least some EVs, so dozens of fully electric models now compete for your dollars — and greater competition means lower prices, right?
Despite all of the good news, the average price of a new electric vehicle is still just shy of $60,000, according to Kelley Blue Book, which is well out of reach for budget-minded buyers. Moreover, consumers paid over 14% more for electricity last year than in 2021.
So, despite the widespread adoption of battery-powered cars, will electric vehicles ever become truly affordable? If so, when?
GOBankingRates asked the experts.
Average Buyers Will Be Priced Out for the Next Few Years
Steve Birkett, senior EV editor at Find The Best Car Price and content creator with Plug & Play EV, thinks it’s important to break down the question into long-term and near-term affordability.
“For the near future, electric vehicles will remain a premium purchase for budget-minded buyers,” he said. “Despite improvements in the global supply chain, battery production remains constrained when compared to global demand for EVs.
“In addition, all of the established automakers are still building out their production facilities to manufacture these vehicles in key markets, which means they have yet to unlock the economies of scale that accompany mass production.”
By Decade’s End, EVs Will Be Cars for the Everyman
When projecting to the more distant future, the outlook is much brighter.
“Despite inflationary pressures forcing the price of lithium-ion batteries to finally rise in 2022 after a decade of declines, unprecedented investment in production facilities and sourcing raw materials should ease that pressure by 2025,” Birkett said. “Incentives to accelerate domestic production across multiple markets, such as the Biden administration’s Inflation Reduction Act … will also catalyze this trend to more cost-effective EV production.
“This combination of reshoring and increased production capabilities, along with less expensive battery chemistries like lithium iron phosphate and increased competition across all market players, will combine to make electric vehicles cheaper to purchase and own than their combustion equivalents before the decade is out.”
Prices Will Fall as EV Infrastructure Expands
Insufficient public infrastructure has long been a roadblock to EV affordability.
“It is reported that the U.S. has about 56,000 charging stations, with California having the most number of ports,” said Talha Atta, mechanical engineer and editor of Auto Globes. “For electric cars to be cheaper, an increase in the charging ports well-distributed around the country is needed.”
That increase is already well underway.
Recent Legislation Could Create a Tenfold Increase in Charging Stations
According to the White House, those roughly 56,000 stations host 130,000 charging ports. That’s an increase of more than 40% since President Biden took office — and that number is poised to skyrocket.
“The federal government opened applications for the first round of a $2.5 billion program to build EV charging in communities and neighborhoods nationwide,” said Andrew Sachs, president of Gateway Parking Services.
He references the Charging and Fueling Infrastructure (CFI) Discretionary Grant Program, which the Department of Transportation launched on March 14. It aims to build a national network of 500,000 charging stations by 2030 — nearly 10 times more than today.
“The program will provide $1.25 billion to strategically deploy publicly accessible EV charging infrastructure in communities across the nation,” Sachs said. “Within a short period of time, this program will enable easy access to charging.”
Last Year’s Spike in Battery Prices Appears To Have Been a Fluke
According to DOE estimates, the cost of battery packs dropped by nearly 90% between 2008 and 2022. But, according to Bloomberg, that trend changed last year when the price of lithium-ion battery packs increased for the first time ever, rising by 7%.
Today, that appears to have been a blip caused by extraordinary — and temporary — circumstances.
Sachs said, “The cost of lithium, manganese, cobalt, graphite, steel and nickel, which are key ingredients for batteries, is coming down after hitting highs during the recent supply shocks from COVID and the Russian assault on Ukraine.”
For One Business Owner, the Era of Affordable EVs Is Already Here
Mitch Smedley, owner of Smedley Plumbing in Blue Springs, Missouri, shared his experience with going electric. While purely anecdotal, his story provides a real-world glimpse into the true costs of switching from gas vehicles to EVs — at least for a commercial operation with a fleet.
“I purchased five Ford Transits in the first few months of 2022,” Smedley said. “Four of those were gas units and one was an all-electric Ford E-Transit. Purchase prices before registration fees were $69,000 for the gas units and $56,000 for the E-Transit — plus the E-Transit qualified for the $7,500 federal tax credit.
“Additionally, the registration fees were about $1,000 cheaper due to the cheaper purchase price. So we saved $21,500 right off the top by buying an EV.”
The EV also earned Smedley a better financing rate.
“We have a rate of 4.9% on the gas units and a rate of 2.09% on the E-Transit,” he said. “This rate, along with the lower purchase price carried over the 60-month term, saves us another $6,000 in interest.
“As far as ongoing costs are concerned, we ran the math and learned that our gas Transits cost us between $110 and $140 to fuel them to drive 350 miles. Thanks to our $0.05/kWh electric rates in Kansas City, our E-Transit only costs us $9 to charge it to drive the same 350 miles. We average 300-350 miles per week in our vans, so this is a savings of $100 for every week we drive the van.”
In total, the E-Transit will save Smedley about $52,500 over the five-year service life of the vehicle.
“These are also just the hard costs of ownership,” Smedley said. “Maintenance is expected to be less on the EV, but we don’t know what those numbers are yet so we can’t use those in our calculations.”
More From GOBankingRates
- Houses in These Cities Are Suddenly Bargains
- See GOBankingRates' Top 100 Most Influential Money Experts and Vote for Your Favorite
- 3 Things You Must Do When Your Savings Reach $50,000
- 48 Easy Things You Can Do To Live Better and Save Money