Due to the rise in fuel prices over the past year, people are considering switching to an electric vehicle in order to save money. The problem is, statistics on electric car demographics show that electric cars are (still) only for the upper middle class and wealthy people.
But for years, car buyers have wondered whether electric cars are getting cheaper.
Let’s have a look.
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Are Electric Cars Getting Cheaper?
Electric cars are probably not getting cheaper over the next years. Several components are getting harder and more expensive for the manufacturers to get. Especially the battery is getting more expensive to produce due to the high price of nickel, lithium, and cobalt.
We have an article here listing how much batteries for electric cars cost.
Let’s dive deeper.
How Are Electric Car Prices Developing?
There was a time when early adopters and rich consumers were the only ones who could afford electric cars, but things are now quickly changing.
The price of a modestly priced electric vehicle ranges from $27,500 to $35,000, making it accessible to most consumers due to the fact that they can provide relief from rising fuel costs.
Interestingly, a new report by the Zero Emission Transportation Association (ZETA) revealed that electric vehicles are now considered to be three to six times more affordable to drive in America.
The escalating cost of electric vehicles is not shocking. In recent years, due to the economic shift, everything seems to be getting more expensive. Prices typically grow as demand rises and materials become more difficult to obtain or scarce.
In May 2022, consumers spent an average of $50,000 on a new electric car, up around 20% from the previous year.
Tesla has raised the cost of its cars several times this year. As a result, some of its electric vehicles now cost approximately 10% more than they did at the beginning of 2022.
Rivian and Lucid, two up-and-coming electric car companies, have also raised prices; this appears to be the trend in much of the sector, including with established manufacturers like Ford and General Motors.
Theprimary cause of the price increases is an increase in material costs. Material costs have increased by a whopping 144% since March 2020. The CEO of Ford, John Lawler, revealed that some material prices had increased since the pandemic, rendering the Ford Mustang Mach-E unprofitable.
Moreover, prices will also increase in the future as a result of the enormous demand.
How Can The Price Of Electric Cars Be Influenced In The Future?
Elon Musk, the CEO of Tesla Inc., set a goal for himself during the company’s much-publicized Battery Day conference in 2020.
He is determined to manufacture a $25,000 electric vehicle in the next few years. It is thought to cater to the mass market at such a sticker price, which is nearly $18,000 less expensive than the lowest-priced model available now.
To get there, it will be necessary to find new technological advantages, most importantly in the batteries, which can account for up to a quarter of a vehicle’s price.
There is the entire manufacturing process to achieve the goal of making a cheap electric car.
The complete rear portion of a car will be produced by Tesla using the largest molding machine ever built from a single sheet of die-cast aluminum. Additionally, the amount of material utilized could be reduced by combining the battery with the vehicle frame.
According to BNEF, the advancements in materials and technology that transmit energy between the batteries, engine, and wheels of a car, which may cost up to 10% of a car, will make the car roughly 5% less expensive in the upcoming years.
In the next 10 years, many technologies that will affect the price of EVs will have transitioned from testing grounds to manufacturing facilities. We also see increased focus on electric cars politically.
Sila Nanotechnologies Inc., based in California, is replacing the graphite in battery anodes with silicon to extend battery life by at least 20%.
The race to develop a solid lithium-ion battery, which redesigns a cell’s structure to substitute the flammable liquids that permit discharging and charging with ceramic or polymers, is on between Toyota Motor Corp. and QuantumScape Corp.
That development can result in:
- increased energy storage,
- cut costs,
- increased safety,
- and reduced recharging periods.
A conventional battery warranty today only lasts around 150,000 miles or eight years, but CATL, a Chinese company, is prepared to develop a massively long-life battery that will last up to 16 years.
This implies that a single pack could be used to operate in various cars or for multiple things. As older electric vehicles are replaced, a rapidly growing industry is focusing on recycling battery metals or refurbishing batteries.
All of this will eventually bring cost-cutting margins to the EV industry.
Why Are Electric Cars Still So Expensive?
Research revealed that the average cost of nickel, cobalt, and lithium used to create electric vehicle batteries is currently around $8,500 per electric car.
As per CNBC, that price indicates a rise of a further 140% from the $3,400 in raw resources needed to produce an electric car in March 2020.
The most expensive component of an electric car is its battery. It’s because the elements needed to make electric car batteries are expensive.
Here are a few explanations for the EV batteries’ hefty premium.
- Rare earth metals like nickel, lithium, and cobalt are needed for electric car batteries, but they are tough to obtain.
- Further, these metals require a lengthy process of mining and refining to be utilized in electric car batteries.
- The battery pack accounts for approximately 30 to 40% of the total cost of an electric vehicle.
Since Sony Corp. began commercializing lithium-ion technology in 1991, this innovation has ruled the battery market.
The elements have advanced from video recorders to SUVs, buses, and ships thanks to upgrades in:
- and price.
Lithium-ion cells include 2 electrodes; a cathode and an anode; and an electrolyte to move the charge across them. But, there are variations with respect to the elements used in the battery, which play a significant role in energy storage.
Iron and phosphate cathode chemistry is less expensive and can be used in small energy storage devices or short-range cars. For higher efficiency automobiles, automakers prefer more powerful materials, such as lithium, cobalt, nickel and aluminium.
Furthermore, companies are working on bringing more improvements to increase the range and also aim to balance variables like fireproofing.
Safety concerns have been brought to light by recent battery fires and automobile recalls.
What Are The Other Factors That Effect Electric Car Prices?
The price of an electric vehicle is increased in more ways than just the battery. In comparison to automobiles powered by combustion engines, electric vehicles are more expensive for a variety of reasons. Some of the elements that contribute to the high purchase price of battery-powered vehicles are listed below.
Automobile manufacturers devote significant time and resources to the research and development of electric vehicles.
From the battery pack to the wheels, every part of an electric vehicle needs to be specifically developed. Therefore, in order to cover the cost of production, the automakers are pushed to raise the price.
Compared to a regular car, an electric car may have a simpler operating system. But advanced and expensive technologies are required to produce an electric vehicle.
High-capacity batteries and electric motors need to be managed by modern electronic systems. Advanced driver assistance technology is also available in some electric cars.
As a result, EVs are far more expensive than conventional vehicles.
Lack of skilled staff:
The field of electric vehicles is still developing.
As a result, it is difficult to find the skilled workers needed to produce these cars. It has an indirect effect on an electric car’s overall cost. Moreover, maintaining an EV is costly due to a shortage of skilled mechanics.
Government-imposed taxes also make electric vehicles expensive. The current policies have a hefty tax which eventually increases the overall price of the electric car.
The cost of auto insurance is likewise on the expensive side.
As a result, insurance for an electric car is more expensive than insurance for a gasoline or diesel vehicle.
Is It Possible For Car Batteries To Become Cheaper?
Recently, BNEF reported that in the last 10 years, the price of EV batteries has decreased by $1,000 per kWh.
Although prices aren’t expected to drop massively, BNEF estimates that by 2024 lithium-ion packs will reach a value of $93 per kWh. Automakers are focusing on using nickel instead of expensive cobalt because nickel is less expensive and has a higher energy density.
Moreover, the benefit of cobalt is that it doesn’t overheat or catch fire readily. Before making any crucial changes or a replacement, manufacturers must make safety improvements.
In addition, a high-energy battery without cobalt will be made commercially available by Panasonic Corp. in Japan in the next couple of years. Among other providers, it is already making lower-energy batteries.
The battery packs that contain lines of cells are also receiving attention.
These packs typically resemble large suitcases. Additional savings can be achieved by streamlining the structure and using a generic product instead of a customized battery for each model of automobile.
How Affordable Are Electric Cars For Middle-Class Families?
Electric vehicles cost substantially more than conventional gasoline or diesel vehicles. It can be said that electric vehicles don’t fall into the affordability category for middle-class drivers due to their excessive cost.
Secondly, there aren’t many used electric cars on the market because they are still relatively new and uncommon.
The good news is that things might soon start to change. Electric vehicles will not only become more economical but also more cost-effective than conventional vehicles. This is expected to occur soon.
In the upcoming years, the price of electric cars is expected to decrease.
As soon as 2025, experts predict that EVs will be competitive with gasoline-powered vehicles.
One reason is that automakers have discovered more affordable production procedures that will lower the price overall.
Likewise, batteries for electric automobiles are currently more affordable than ever thanks to advancements in battery technology. A sizable number of used electric cars is also anticipated to enter the market soon.
What Role Do Electricity And Gas Prices Play?
In the United States, residential electricity costs an average of 13 cents per kilowatt hour. Driving an electric car only costs $1.41 per gallon. With respect to gasoline, that represents a 70% savings.
Since electricity and gasoline are priced differently in each state, the cost comparison between electric vehicles and gasoline differs from state to state.
EV owners have an edge in this situation. One of the main benefits of making the switch to electricity is that you may save money on expensive trips to the gas station.
According to 2018 research by the University of Michigan, an electric vehicle’s annual fuel costs average $485, compared to a conventional vehicle’s annual fuel costs of $1,117.
A 2020 Consumer Reports study confirmed that electric car owners typically spend around 60% less annually on fuel than owners of fuel-efficient vehicles.
Your electricity bill will increase when you charge your automobile at home, but the exact amount depends on when and where you charge it.
The price of electricity can vary greatly by region, just like the cost of gas.
The biggest margin available to electric car owners is in Washington State, who could save as much as $14,500 over the life of their car. Hawaii is at the other end of the spectrum, where switching to electricity might end up costing $2,500 more.