Pricing EVs Out of the Market

Consumers eager to purchase BEVs could be excused for feeling bewildered and frustrated by prices, which continue to rise even as the cost of the batteries powering them decline.

Max Reid, research analyst, Battery Raw Materials Service, at Wood Mackenzie, said: “Battery pack prices have decreased from less than $1,000/kWh in 2010 to $150/kWh in 2020, reducing the cost of the pack from about $60k to about $10k for a 60 kWh EV in that time.” That’s a decline of more than 80% in a decade in which the prices of electric vehicles increased by almost the same amount. The reasons for that are many. For one thing, manufacturers led by Tesla concentrated on the profitable market for luxury vehicles, before expanding into cheaper, mass-market vehicles.

There were the numerous global events that affected prices, such as supply chain breakdowns, factory shutdowns owing to the Covid pandemic, raw materials shortages and, finally, exorbitant energy and gasoline price rises due primarily to Russia’s invasion of Ukraine. The price disparity between BEVs and ICE cars is the primary reason the electric-car market has failed to fire and this disparity continued to grow last year. A study by found that as of July 2022 EV prices rose 54.3% year on year compared to 10.1% for ICE vehicles.

As a result, many consumers looking to own a BEV may have given up waiting for affordable electric vehicles to be widely available at a time when, as Reid put it: “We are past the point where the general consumers need convincing that EVs are an attractive solution. Now we need to establish the supply chain that can actually meet consumer demand while remaining cost competitive with ICE vehicles.”

However, good news for the consumer may be coming. If there are no more real-world events that negatively affect EV prices, this year could eventually be regarded as a tipping point in electric car take-up – or at least the beginning of the era of affordable EVs. One reason is the Inflation Reduction Act, recently signed into law by US President Joe Biden. It offers 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.

Another propitious sign is the appearance on the market of a number of relatively inexpensive BEVs, such as the Chevrolet Equinox EV, an SUV that, General Motors says, will launch in the fall and start at $30,000. GM has also announced the launch in early 2024 of the all-electric Chevrolet Blazer EV 1L, with a starting price of $44,995, before incentives.

Toyota’s bZ4X and Nissan’s Ariya Engage EV are both already available but in limited quantities, and start at $42,000 and $43,190 respectively. Finally, the Fisker Ocean Sport is available for pre-order at the starting price of $37,499.

In addition, in April of last year GM and Honda announced an expansion of its partnership to produce a series of affordable electric vehicles on GM’s Ultium EV platform. The partnership plans of producing “millions of EVs starting in 2027”, including a “new all-electric product for North America positioned at a price point lower than the … Chevrolet Equinox EV”. In the press release, Doug Parks, GM executive vice-president, global product development, purchasing and supply chain, said that part of this project is to increase the platform’s capacity to two million EV units “by the end of 2025”.

This represents a serious attempt at scaling up and perhaps will provide a blueprint for other carmakers: partner up and scale up. As Ram Chandrasekaran, head of transport and materials at Wood Mackenzie, put it: “The primary driving factor behind EV cost reduction as of 2022 is the economies of scale.” Yet, nothing is ever certain in the BEV market. Reid says that substantial risks remain for the EV market. “There is a real risk of increasing [battery] pack prices as the cost of raw materials, as well as energy and labor, increases. Lithium, nickel, cobalt, graphite, rare earths are all at risk. The sheer scale of demand growth – roughly 300 GWh to 3000 GWh from 2020 to 2030 in battery demand – means it will be difficult to use any alternative other than Li-ion batteries, which have reached mature and scaled production.”

On January 3, a company supplying lithium to Tesla, Piedmont Lithium, announced that until the end of 2025, the price the carmaker pays for the lithium will no longer be fixed but will be linked to market prices. Given that the price of lithium is almost certain to increase, as demand for it grows, this represents a potential setback to lower EV prices. It seems that the EV price uncertainty could be with us for a while.


  1. Avatar William May 20th January 2023 @ 6:35 pm

    Government subsidies and the results of unintended consequences?

    • TU-Editor TU-Editor 21st January 2023 @ 10:24 am

      Some would say that technology that has to be shored up with government grants and impending bans on rival ICE technologies isn’t real innovation anyway…

  2. Avatar Dean Richardson 23rd January 2023 @ 6:20 pm

    The other possibility is a pricing strategy adopted by the major manufacturers, who can command SCM efficiencies, making deliberate pricing choices to avoid cannibalizing their ICE sales prematurely. New entrants solely focused on EV may not have the SCM leverage to drive cost reductions. In turn, both these may be driven by shareholder demands for faster ROI, etc. Government is NOT always the problem…

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