EV prices are going in the wrong direction

One of the major barriers to mass adoption of electric vehicles is cost. EVs are extremely expensive, with the average price hitting an all-time high of $66,000 earlier this summer. This is disappointing because the auto industry has always promised that prices will drop as EV battery packs become more efficient to manufacture.

But even more disappointing is that EV prices continue to rise relative to their gas equivalents. According to a recent analysis by car shopping database iSeeCars, electric car prices rose 54.3 percent year-over-year while gas-powered cars rose just 10.1 percent.

The reason EV prices have risen at such a staggering rate is multi-layered. There is a global chip shortage, which has caused major production problems for the industry and sent vehicle sales tumbling. And, perhaps predictably, there are high gas prices, which have caused car buyers to snap up all the EVs they can find on dealer lots, leading to a steep decline in inventory.

To determine the price increase of electric cars compared to conventional fuel vehicles, iSeeCars analyzed the prices of more than 13.8 million used cars sold between January and July 2021, as well as cars sold during the same period in 2022.

They found that EV prices rose in January 2022, up 54.1 percent from the previous year thanks to higher gas prices fueling demand for plug-in vehicles. Price increases for both EVs and gas vehicles fell in March, but while they continued to go down for conventional vehicles, they went back up for EVs and continued to rise over the summer.

Interestingly, the two EVs with the biggest year-over-year price increases 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 over the previous 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 big price discount, averaged $28,291, a 29.3 percent increase from 2021.

Image: Spencer Platt/Getty Images

Tesla vehicles are up an average of 19.2 percent, with the Model S rising 27.5 percent to $83,078. According to iSeeCars, the only EV to go down in price was the Porsche Taycan, which dropped 3.5 percent to $138,033. This reduction shows that there is a limit to what car buyers are willing to pay for a used EV — even one with a coveted nameplate like Porsche.

Sellers are marking up the prices of some of the 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 angry customers, prompting news stories about outrage and leaving automakers scrambling to contain the fallout. Many buzzworthy models have been sold for years.

More broadly, EV prices are rising amid changing markets and rising commodity costs, particularly the key materials needed for EV batteries. Battery prices have been falling for years, but some experts are predicting that rapid growth in battery minerals could increase cell costs by as much as 20 percent in the next few years.

But this price increase may not last for this world. According to Carl Brauer, executive analyst at iSeeCars, there are a bunch of positive developments on the horizon that could stabilize EV prices.

The Inflation Reduction Act, which was recently signed into law by President Joe Biden, includes 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 mostly used by the US and its trading partners). There’s also an expected wave of new, more affordable EVs on the market, such as the Chevy Equinox EV, which GM says will start at $30,000 and will come with “millions” of less expensive models from a partnership between GM and Honda.

So, while sticker shock is likely to become a major barrier 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 will not be much of a novelty, especially once supply chain issues begin to improve,” Brauer said in a statement. “While potential used car buyers will see steep price increases for EVs in the short term, it is important to be patient as used EV prices are expected to decline in the coming months.”

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