In the last ten years, electric cars have become a huge hit. Tesla’s popularity helped bring electric cars into the spotlight, and the company still makes most of the market’s electric cars. Other brands, like Rivian, did the same thing, and their stock prices went up after their newest models came out in 2022. But because of inflation, the average cost of an electric vehicle has increased significantly.
What will an electric vehicle cost on average in 2022?
Kelley Blue Book, the best price guide in the United States, says that the average price of an electric car in the country in August 2022 was $66,000. Compared to 2021, the average price of an electric car went up by 13%, which shows a strong upward trend.
People who would like to reduce their carbon footprint or avoid the costs of running a gas-powered car are very interested in electric cars. But electric cars are still too expensive for the average American to buy, whose median salary in the 2nd period of 2022 was $54,000.
According to a similar report, the average beginning price of the top ten electric cars was $60,500, and the prices of all cars except Teslas went up. This is a huge jump, especially since the average cost of an electric car in January 2020 was $54,668.
Why have prices for electric cars gone up?
The most troubling thing in the auto industry is that electric vehicle (EVs) prices have started going in the wrong direction. With gas prices rising, many people wanted to switch to electric vehicles, but the cost is still the biggest reason why this hasn’t happened yet.
Even though major automakers said that EV prices would go down in the long run, this hasn’t happened, and prices keep going up. An analysis by iSeeCars shows that the prices of used electric cars have gone up by almost 54.3%, while the prices of used gas-powered cars have only gone up by 10.1%.
The Worldwide Chip Shortage
One of the main reasons EV prices have gone up so much is that there aren’t enough chips on the market. This has caused problems in the supply chain and hurt the sales of cars all over the world.
Companies like Tesla have raised their prices more than once in 2022, and so have Lucid Motors and Rivian, which are relatively new to the market. The prices have increased because the Rivian R1T has so many great features, which is no doubt why. Even Ford, which has been in business for a long time, has raised its prices this year.
The cost of materials goes up.
Several automakers have said that EV prices are going up because the cost of materials is going up. Due to the worldwide pandemic and the supply chain crisis, materials prices went through the roof at the beginning of 2020.
Because of this, some companies have had to raise prices or risk selling their EVs for less than they cost. The CFO of Ford Motor said at a conference in June that one of their best-selling cars, the Mustang Mach-E, is no longer profitable, according to CNBC.
Consideration of Sunk Costs
Sunk costs are the money a business spends on research and development before starting a new project. Many automakers are still researching and making new models, and the money they spend on research and development (R&D) is in the billions.
Companies can’t get back their sunk costs, but they usually make up for it by selling their flagship models at a higher price and lowering them as technology catches up. The price of EVs has increased significantly because of this rise in research and development costs, likely caused by inflation.
What affects the prices of electric cars?
Outside of normal market forces like supply and demand, there are a few things that affect the price of electric cars:
- Features: An electric car will cost more if it has more features.
- Range (battery): The price of an EV is also affected by how much its battery costs. Most companies have more than one version, and the ones with a longer range cost more.
- Material costs: Most companies get their EV parts, like chips and pre-made parts, from countries like China and Vietnam. Prices are directly affected by the rising cost of materials.
- Subsidies: Many governments help lower the price of EVs by giving subsidies to the companies that make them.
- Markup: When there aren’t enough supplies, dealers often raise the markup, increasing prices.
Luxury EVs vs. standard electric cars: a price comparison
The prices of luxury EVs and regular electric cars are very different. In 2022, the Nissan Leaf, which costs $27,400, will be the least expensive electric car. The Chevy Bolt is a reliable electric vehicle that costs $31,000. On the other hand, the cheapest Tesla model in 2022 is the Model 3, which costs $46,990 after a price hike.
The most expensive model will cost $69,000! On the other hand, the market for luxury EVs has continued to grow. For example, the Porsche Taycan Turbo S Cross Turismo sells for $187,700. The Grand Touring Track pack for the Lucid Air costs $179,000. The Model S Plaid, which costs $131,990, is the most expensive thing Tesla will sell in 2022.
It is followed by the Model X Plaid, which costs $131,990. Since they’re aimed at a different part of the market, luxury EV makers have more freedom to raise prices, and a price increase doesn’t affect demand as much. But because of supply chain and production problems, many of the high-end EVs are on backorder.
Electric Vehicle Prices Will Likely Continue to Rise
Even though automakers have tried to reassure the public that prices won’t keep going up, EV prices will likely go up over the next few years before leveling off. In 2023, new electric vehicles will come out, and their prices will almost certainly be much higher than was first thought. As the market slowly recovers, many people will look at other options, especially since the rising cost of owning an electric vehicle (EV) is due to rising energy prices worldwide.