If you have been shopping for an electric car, you must have noticed that they seem way more expensive than conventional cars.
Battery prices have taken a plunge over the past decade, so you would expect electric cars to become cheaper as the battery is the most expensive component of an electric vehicle, but that’s not the case. EV prices are still skyrocketing.
After conducting thorough research, we came up with several reasons why electric cars are getting more expensive.
1. They’re Only Expensive To Buy, But Cheaper To Run and Maintain
You will likely save a lot of money on gas when you drive an electric vehicle. With skyrocketing fuel prices, moving from one place to another in your conventional car will cost you more.
That means consumers will shift their focus to investing in EVs. Generally, if you’re not worried about the upfront costs, you can enjoy low running and maintenance costs.
EVs are largely made of fewer moving parts. That means very few parts need to be serviced regularly. With fewer fluids and mobile parts, you can also expect fewer repairs.
They don’t need spark plugs, oxygen sensors, timing belts or motor oil. The brake wear is significantly reduced due to regenerative braking.
According to a report by Andrew Burnham of the Argonne National Laboratory, the estimated maintenance cost for a fully electric vehicle is 40% less than for gas-powered cars.
Unlike the engine, which is made of several components that can wear and tear, EV batteries are designed to have the same lifespan as the vehicle.
2. The Electric Vehicle Market is Changing
The future is electric. But since we aren’t there yet, EVs will continue to be more expensive.
If you are here, it’s because you’re also looking to switch to electric vehicles. That’s typically what everyone else is looking to do in the next couple of years.
Automakers are going big on electric vehicles to ensure their EVs are high-performing, safe, comfortable and easy to drive, which can be costly.
As vehicles become increasingly popular, more people are investing in them.
The result is a surge in demand.
According to a forecast by the investment bank UBS, 20% of all new cars sold worldwide will be electric by 2025 and 40% by 2030. By 2040, every new car sold globally will be electric.
3. They Are Produced in Smaller Volumes, While Demand is High
The demand for electric vehicles is higher than the supply due to many factors, such as complex technology that restricts or slows production and prevents more manufacturers from producing their versions.
Manufacturers make more conventional vehicles than they make EVs, so regular vehicles are cheaper to make than EVs. Developing EVs is almost like starting from scratch, especially for companies like Tesla and Rivian that only make EVs.
It takes a lot of time to develop the first version of the car that automakers can use to produce others. Many manufacturers are yet to catch up with the technology, skills, workforce, and tools required to produce more vehicles within a short time.
For instance, most luxury EVs this year are the first versions of themselves, making it easy for the makers to give them a price tag of their choice.
4. Anything Eco-Friendly is NOT Cheap
As the world shifts to eco-friendly products, eco-friendly cars also come into the picture. EVs are considered eco-friendly as they produce much lower greenhouse gas emissions than gas-powered vehicles.
Electric cars are silent, which eliminates noise pollution.
EVs are the future of automobiles, particularly for countries that rely on renewable sources of electricity.
People living in countries with limited electricity production may experience problems charging their cars. Many countries are also experiencing shortages in charging stations.
As a result, EVs may be out of reach for people who don’t have the flexibility of charging their vehicles.
5. A Lot of Costly Research is Involved
Developing a new electric car requires massive research. Automakers must ensure they meet the standard safety and performance requirements, which means carefully selecting the components.
A lot of costly research and development is involved and needs to be updated at least every year. Therefore, every new model produced has to cover all these costs.
Companies want to recover the billions poured into the research and development of EVs.
That means we should expect newer models to be more expensive, but these costs will gradually decrease as more EVs enter the market.
When developers first introduced EVs, many people were worried about getting stranded in the middle of the road, but recent developments and better technology have provided easier and faster ways of charging cars on the roads and at home.
6. Only the BIG Brands Are Manufacturing Them = Less Competition
As we’ve already mentioned, a lot of work is involved in planning, designing and producing an EV. Not all companies have the capacity to conduct independent research and successfully launch a new EV.
That means only the big players such as General Motors, Tesla, Audi, BMW, Ford, Chevrolet and many other big names can afford the materials, skills, and technology.
It’s also very easy for the big automakers to deploy any form of technology on luxury cars because buyers can bear the price. Once they’ve ramped up production volume, they start introducing those features into more affordable models to increase sales.
Electric automakers tend to develop luxury cars before expanding their production to more affordable EVs, making it difficult for smaller companies to develop their own vehicles.
7. They Are (Still) Considered Luxury Items
While it’s true that automakers are more focused on developing luxury EVs, consumers play a big role in the costs as most buyers are willing to spend more on EVs.
So, manufacturers are happy to sell them at higher prices.
The realization that only the big auto companies are producing EVs also sends a different message—they’re expensive.
While the majority of EVs produced every day are high-end, it’s easy to brand them as luxury cars due to their high cost. Whether manufacturers choose to produce fewer EVs deliberately or lack adequate supplies like high-end EV batteries, both reasons lead to higher EV prices.
Remember, most of the vehicles are made by large auto companies that can afford any type of innovation. The more they invest in highly expensive vehicles, the more difficult it becomes for small and midsized companies to produce and sell affordable EVs.
8. Their Main Culprits: Batteries
Since EVs rely on batteries to power, they’re meticulously assessed and carefully designed to meet all the set standards, which contributes to the high price tag of the vehicle.
We have a list here of prices on electric car batteries across car brands.
Most batteries are made of lithium-ion batteries, which can be quite expensive to build.
The EV battery plants across the globe are few, meaning only a handful of companies can produce them. These companies end up controlling the markets due to lack of competition.
The production of batteries also requires using expensive metals such as cobalt. Companies must also utilize complex technology, software and sensors to control and monitor discharge rates and temperature.
The good news is that the EV batteries of the future are already on their way. Manufacturers and researchers are already experimenting with sodium-ion, lithium-sulphur, and lithium-iron phosphate batteries to help eliminate the use of expensive metals like lithium, cobalt and nickel.
9. Soaring Gas Prices Have Played a Role
Rising gas prices have inevitably forced many drivers to opt for eco-friendly EVs to save on running costs. As prices continue to go up, more people will buy electric cars in a few years.
Going all-electric means skipping trips to the gas station, which is the main reason why everyone wants to switch.
The average cost to fuel an electric car is $485 per year compared to $1,117 for gas-powered vehicles, according to a 2018 research by the University of Michigan’s Transportation Research Institute.
With prices marking a new record high in 2022, drivers with gas-powered vehicles are likely to spend more than 70% on fuel compared to drivers with electric-powered vehicles.
10. They Cost More To Insure
Part of the cost of owning and running an electric vehicle includes paying more to insure your EV.
We have an article here outlining the reasons why insurance on electric cars costs more.
Again, it all boils down to the cost of buying and repairing.
The first reason is that repairing EVs costs more than repairing regular vehicles.
Replacing the battery alone for an EV can cost you more than $16,000. If you’re taking a loan to finance your EV, you may want to consider the cost of insuring the vehicle and include it in your budget.
Remember to check the insurance laws in your state and purchase enough coverage to protect you and your passengers.
You may also want to check that you actually qualify for a long for the car. You can check here what can cause you to disqualify for Tesla Lending.
The Bottom Line
The combined rivalry, expensive lithium batteries, rising gas prices, and increased demand have driven EV prices up significantly. Currently, there are more than enough wealthy car buyers to purchase as many EVs as automakers can produce.
Once the production of raw materials increases, we can expect these companies to start producing more affordable vehicles. Until then, EVs will continue to cost more to buy than regular vehicles.
For countries like the US to meet their goal of electrifying all personal cars, all automakers must play a part and introduce more affordable EV models by the end of the decade.
If you’re in the market for a new EV, you can always assess your current financial objectives and vehicle needs to make a solid decision.
In the meantime, hybrids still remain a great alternative to regular vehicles. All the best.