With battery supplies short and customers excited, car companies are only making expensive electric cars.
Jack Norton, a history professor in Minneapolis, began shopping for an electric car early last year. His requirements were simple: four-wheel drive and a price tag of less than $55,000.
Initially, Norton noted that few electric vehicles are being shipped to Minnesota, where car companies are competing with lower emissions mandates than they are in most of the United States. So he expanded his research to other states — and then came the sticky shock. The tiny electric models Norton could track down at dealerships were only available in top trims and in quantities well above the starting prices he’d seen in advertisements and product launch presentations.
“Do you know what vaporware is – when someone announces some cool new software that doesn’t really exist?” Asked. “That’s what happens in electric cars.”
Much has been written about noncompliant car sellers who added “market adjustment” fees to take advantage of the current imbalance between supply and demand for vehicles. But while that’s certainly a problem, most electric machines are pushed to luxury car levels early on — before they leave the factory. In July, the average starting price for a battery-powered vehicle in the US — the figure shown in auto ads and marketing materials — was $47,636. However, the average sticker price for electric vehicles built and shipped to dealerships, was $61,251, nearly a third higher, according to Edmunds. It’s not that auto companies don’t have affordable electric cars; It’s just that they don’t make it, choosing instead to roll out more generous (and profitable) versions.
Larger gaps between the promised starting price and available stock appear on the most popular models. Kia’s EV6, which has been a hot seller lately, had an average sticker price of about $54,200 in July, 32% higher than the initial price Kia has climbed since the car’s launch. The pragmatic Chevrolet Bolt–claimed to be the most affordable electric car in the US at $26,595–sold for about an extra third this summer, at an average of $34.874.
John Fitzgerald Weaver, who lives in Boston and builds commercial solar farms, had to go to Long Island to find a Hyundai Ionic 5 without all-wheel drive—the only alternative under $47,500. “When I saw they had it, I was like ‘sweet, I’m going to buy it today,'” he says. ‘No matter that the car came with a $1,000 surcharge, it wouldn’t arrive for more than a month.
Of course, there is sound economics behind all of this. Arguably for the first time ever, companies that make and sell cars have more demand than supply, according to Edmunds analyst Evan Drury. Oversupply takes time, particularly with new technology such as electric drivetrains, and car companies rushing to add assembly lines and source batteries. Meanwhile, they are raising prices.
Compounding this dynamic is the fact that much of the current supply of electric vehicles is entirely new. In the months following a new car—gas or electric—companies tend to prioritize fancier versions with high-end features, in part because early customers are the most enthusiastic and extravagant.
That tension is perhaps not most evident at Ford Motor’s Rouge complex in west Detroit, where the company is rolling out both F-150 gas trucks and a battery-powered version called the Lightning. Ford hopes to have the capacity to produce 150,000 Lightnings per year by the end of 2023, but for now it is producing roughly four or five times as many gas-powered F-150s. While Lightning can theoretically be had for just $40,000, in July it sold for more than twice that on average. Ford said by email that the cheaper “Professional” version of the electric truck has been limited to one in five trucks on the assembly line, as it seeks to weed out an excess order book.
Meanwhile, General Motors ramped up its affordable electric car narrative again this month, unveiling an electric version of the Chevrolet Equinox SUV that it says will start selling for less than $30,000. “To get access to a large number of electric vehicles, you have to have access to the main market,” Bloomberg Television CEO Mary Barra said.
Drury at Edmunds thinks it will be at least two years before a critical mass of battery-powered cars is sold at this price point. “For under $30,000, that’s the dream, but it seems borderline impossible,” he says.
At the moment, customers are not completely rejected. The difference between starting and sticker prices is also large in gasoline-powered cars these days, although it is more pronounced with electric vehicles, which are priced more than 30%-40% on average. Already electric car buyers tend to be more affluent, and with auto loans lasting eight years, many are comfortable buying higher variants or stacking up on expensive options.
“It’s kind of a self-selection,” Drury says. “You already have people who have the means to choose a car, and if it’s their first time in an electric car… they will treat it as an important purchase.”
But affordability is arguably the biggest remaining hurdle when it comes to the widespread adoption of electric vehicles which will be necessary to reduce emissions. Despite several dozen mainstream electric models entering the market in the past few years, a broad segment of Americans still can’t afford to switch. The average EV sticker price in July was also well above the $55,000 threshold for cars to qualify for the latest round of federal tax incentives.
For its part, Hyundai indicated via email that most of its new cars tend to attract customers keen on additional features, even at higher price points. Currently, the company says 38% of the Ioniq 5 models it makes are the base variant, a share it expects to increase “with the natural progression of buyer stages in the lifecycle.”
However, this reasoning is not checked using Norton. He believes that car companies should have struggled to expand production of electric cars earlier, and he suspects that auto executives are only trying to cut profits from gas engines while they still can. “The argument made by the auto companies is basically that ‘capitalism works,'” he says. “But I teach economic history and what I see are artificial limitations.”
Norton gave up buying an all-electric car a few months ago and settled on a Honda CR-V hybrid. It was loaded with a bunch of options he didn’t care about, even though it still came in at around $46,000. Plus it was available – sort of. “Last we heard, they’re building it this week,” Norton says.
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