Here’s why many electric vehicles are so expensive
Battery costs are keeping the price of electric vehicles higher than their gas-powered counterparts, analysts say.
Electric vehicle batteries are typically made from minerals like lithium, cobalt and nickel that have to be made from minerals that are in high demand.
The high costs keep these vehicles out of reach for many Americans, hampering the adoption of an important tool in the fight against climate change.
“Batteries are still expensive. They’re more expensive than gas engines at the moment,” said Michelle Krebs, executive analyst at Cox Automotive.
While the price of an electric vehicle may vary, these types of cars are typically more expensive upfront than those that require gasoline.
As of July, the average price for an electric vehicle was about $18,000 more than the average for cars generally, according to Kelley Blue Book. The organization has also pointed out that price disparities can be seen between electric and gas-powered versions of the same car.
Consumer Reports found in 2020 that electric vehicles can cost between 10 and 40 percent more than other, similar vehicles. But the reports noted that consumers typically save between $6,000 and $10,000 on fuel and other costs over the course of their electric car ownership.
Several industry analysts told The Hill that batteries are the main source of this difference.
“In any vehicle the power plant is the most expensive part of the product, and that’s driven by the raw materials, the refining, the amount of energy and the precision that’s required in creating a battery cell and in creating battery packs,” said Carla Bailo, CEO of the Center for Automotive Research.
Sam Abuelsamid, principal analyst of e-mobility research at Guidehouse Insights, said that the batteries typically account for a third of the cost of the vehicle.
“Battery prices have come down pretty dramatically over the last decade,” he said, “But nonetheless, especially this year, we’re actually seeing battery prices go back up again because of a spike in some of the key raw materials that are required for the battery.”
Electric vehicles are most commonly powered by batteries that are made up of minerals including lithium, graphite, manganese, cobalt and nickel.
Abuelsamid said that the current high prices for minerals are a “short-term problem,” adding that the demand for lithium is spiking right now but that the mineral is abundant across the globe.
“Over the last two, three years, as the demand for EVs has grown dramatically, particularly in China and Europe and more recently here in North America, the demand for lithium has exploded and so have the prices,” he said, noting that nickel prices also rose after Russia’s invasion of Ukraine since some nickel comes from Russia.
But the prices of electric vehicle batteries in the next few years could decrease “because we’re developing new sources of lithium … and also moving toward some different battery chemistries that are using materials that are more accessible and more affordable.”
He predicted that prices for electric vehicles could be in line with gas-powered cars in 2025 or 2026.
Bailo said another factor in the high prices of electric vehicles is that there are fewer of them, so certain costs for automakers are spread out among fewer cars and companies can’t get as favorable rates from their suppliers.
Many electric vehicles are also made by luxury brands or by a company will make their most expensive models electric, meaning that they can be more expensive than an average car.
Krebs, from Cox Automotive, said that for just about every new automotive technology, “it always starts on more expensive cars and then works its way down as volume increases and they figure out ways to make it more affordable.”
Democrats, meanwhile, have said that their new Inflation Reduction Act is expected to help bring down the costs for consumers, with tax credits totaling as much as $7,500 for electric vehicle purchases.
But the credit comes with certain stipulations that may be very difficult to meet, at least in the near term. Half of the credit — $3,750 — will rely on where battery minerals come from, requiring a certain, escalating percentage to come from countries with which the U.S. has a free trade agreement. The other half of the credit will be based on manufacturing battery components in North America.
Experts say the minerals requirement will likely disqualify most cars in the near term, making the credits less effective, but could help shore up a U.S. or U.S.-friendly supply chain in the long term and make the country less reliant on places like China.
“What they came up with, in the long term, will actually probably be better because it will incentivize … localizing production of materials of batteries so you’re not shipping stuff all the way around the world,” Abuelsamid said. “But, in the near term, the program as it is right now was clearly structured to appease Joe Manchin.”