One of the major barriers to mass adoption of electric vehicles is cost. EVs are just way too expensive, with the average price hitting an all-time high earlier this summer of $66,000. That’s disappointing because the auto industry has always promised that prices would come down as EV battery packs became more efficient to manufacture.
But even more disappointing is the rate that EV prices are increasing as compared to their gas equivalents. According to a recent analysis by car shopping database iSeeCars, electric car prices saw a year-over-year increase of 54.3 percent while gas-powered cars were up just 10.1 percent.
The reason EV prices have shot up at such a staggering rate is multilayered. There’s a global chip shortage, which caused huge production problems for the industry and sent vehicle sales tumbling. And, perhaps counterintuitively, there are high gas prices, which caused car buyers to snatch up all the EVs they could find at the dealer lots, leading to a steep drop in inventory.
To determine the price growth of electric cars compared to conventional fuel vehicles, iSeeCars analyzed the prices of over 13.8 million used cars sold between January and July of 2021 as well as those cars sold over the same period in 2022.
They found that EV prices spiked in January 2022, up 54.1 percent as compared to the prior year thanks to high gas prices driving a surge in demand for plug-in vehicles. Price increases for both EVs and gas vehicles dropped in March, but while they continued to go down for conventional vehicles, they went back up for EVs and just kept increasing into the summer.
Interestingly, the two EVs that saw the biggest price jumps year over year were also two of the most affordable vehicles on the market: the Nissan Leaf and the Chevy Bolt EV. A used Leaf now sells for an average of $28,787, which represents a 45 percent increase compared to the prior year. The Leaf is reportedly nearing the end of its lifespan, with Nissan considering whether to discontinue the EV in the coming years. Meanwhile, the Bolt, which recently got a huge price discount, averages at $28,291, a 29.3 percent jump over 2021.
Tesla vehicles have gone up on average 19.2 percent, with the Model S seeing the biggest price jump of 27.5 percent to $83,078. The only EV to go down in price, according to iSeeCars, was the Porsche Taycan, which dropped 3.5 percent to $138,033. This decrease suggests there’s a ceiling of what car buyers are willing to pay for a used EV — even one with a desirable nameplate like Porsche.
Dealers have been marking up the price of some new EVs, especially those in hot demand, like the Ford F-150 Lightning, GMC Hummer EV, and Kia EV6. This has led to a cycle of enraged customers, spurring news stories about the outrage and leaving automakers scrambling to contain the fallout. Many of the most buzzworthy models are sold out for the year.
More broadly, EV prices are going up amid changing market conditions and rising commodity costs, specifically for key materials needed for EV batteries. Battery prices have been declining for years, but some experts are predicting that a sharp increase in battery minerals over the next few years could lead to a rise in cell costs by as much as 20 percent.
But this price surge may not be long for this world. According to iSeeCars executive analyst Karl Brauer, there are a bunch of positive developments on the horizon that could lead to the stabilization of EV prices.
The Inflation Reduction Act, which was just signed into law by President Joe Biden, contains a $7,500 tax credit for new EVs and a $4,000 credit for used ones (as long as they are produced in North America and use parts mostly from the US and its trading partners). There is also an expected wave of new, more affordable EVs coming on the market, like the Chevy Equinox EV, which GM has said will start at $30,000, and “millions” of less expensive models emerging from a partnership between GM and Honda.
So, while sticker shock is likely to remain a major obstacle to mass adoption of EVs, it may not be the status quo for much longer.
“More and more affordable new electric vehicles are entering the market, which means that used EVs won’t be as much of a novelty, especially once supply chain issues begin to improve,” said Brauer in a statement. “While prospective used car buyers will see steep price increases for EVs in the short term, it’s important to be patient because used EV prices are expected to decline in the coming months.”