The Race to Make EVs Cheaper Is Making Them More Expensive

• Electric vehicles aren't the most affordable right now.
• Automakers say they are racing to change that.
• But it does mean that supply and demand actually pushed prices higher.

The auto industry's race to create more affordable electric vehicles has really pushed up the prices of these vehicles, at least in the short term. The industry is desperate to build affordable electric vehicles for the masses. This is because price (along with concerns about range and rechargeability) is one of the biggest barriers to mass EV adoption. According to the Kelley Blue Book, the average price for a new EV in November was $65,041, while gas vehicles averaged $48,681 for the month. Automakers say they are doing everything they can to introduce cheaper EVs. For example, the 2023 Chevrolet Equinox SUV EV should start at around $30,000. Tesla pulled some back from racing this year, but many have long targeted that number. Elon Musk told investors earlier this year that his company no longer prioritizes the $25,000 EV. Part of the reason EVs are so expensive is because luxury cars dominate the market. Ford's F-150 Lightning electric pickup starts near $56,000. The GMC Hummer EV will cost over $100,000. His Rivian startup has put a $73,000 base price tag on his R1T truck, while Lucid has raised the price of the cheapest variant of the Air sedan to $87,400. But a more stubborn problem stems from the battery industry and the simple laws of supply and demand.

The world of batteries will impact EV prices

Automakers plan to pour more than $515 billion into all-electric lineups over the next few years. GM and BMW plan to make at least 50% of new car sales EVs by 2030, and GM wants to eliminate all emissions-emitting cars by 2035. From 2025, new vehicles will be electric vehicles. By scaling up, electric vehicles are inherently cheaper over time. In the short term, however, the surge in demand was enough to reverse a decade-long decline in battery prices, according to a recent analysis by Bloomberg NEF. Did. It's simple. The more the automaker plans to produce his EV, the more raw materials it will need for the battery. The smaller the supply available, the higher the price of those materials, and the higher the price of the battery as a whole. Demand eventually sparked a frenzy, and batteries continue to be the most costly part of an EV.

price cut is imminent

According to McKinsey, the price of lithium alone has soared by 500% this year. That metal could be the biggest obstacle to cheaper EVs. Foley & Lardner partner Craig Dillard said more and more people will be looking to procure large lithium supplies to ensure they have what they need for the next fiscal year. . Fall Insider. "We have to think about where the materials are sourced," Dillard said, "and the extent to which the price of lithium affects not only profitability but also the general pricing of the product." . Some signs suggest that may not be the case in the long run. Increasing adoption of low-cost battery mixes will play an important role alongside recycling as lithium prices drop as more extraction and purification take place online. "We're going to see an excess of demand for supply over the next few years," said Andreas Breiter, a partner at McKinsey, pushing up costs. But by lowering costs, "the price of lithium will trigger more supply to enter the market," he says.