Many people like the idea of electric cars until they see their advertised prices. Battery-powered cars are significantly more expensive than their ICE counterparts. This is a significant barrier for potential EV owners, even though they stand to save on fueling and maintenance costs down the road. But then, why are electric cars so expensive? Keep reading to find out.
Batteries cost a lot
The battery is one of the key components of an electric car because there is no motion without it. Modern EVs use lithium-ion batteries and are the single most costly part. They could take up to one-third of the cost of materials.
However, many companies including Tesla are researching cheaper ways to make batteries. As a result, battery costs have been dropping steadily. For example, Tesla’s battery costs have been estimated to drop by almost 45% between 2016 and 2019. As the batteries becomes cheaper, EVs will become more affordable and comparable in cost to ICE vehicles.
EV makers focus on higher-end models
Tesla entered the market with a top-of-the-line model. While it helped generate buzz and revenue to expand production, it meant their EVs were priced much higher than many could afford. Many EV startups have copied Tesla’s strategy of targeting the top end of the market by first releasing more expensive models packed with lots of features and luxury. Rivian and Lucid have also taken Tesla’s lead with this strategy.
When these companies turn their attention to less expensive models, like Tesla will with a rumored ‘Model 2,’ EV prices will surely come down.
Scale of production
Electric vehicles are becoming more popular with sales increasing yearly. For example, Tesla shipped more than 900,000 cars in 2021. However, compared to the number of ICE cars sold globally, the EV industry is still considered niche. Without the benefit of mass manufacturing, production costs tend to be higher, which are ultimately passed on to the buyers.
Similarly, legacy automakers switching to EVs have to retool or upgrade their production plants, and the buyers ultimately bear the cost.
This problem is expected to disappear as more companies get into EV production, especially the legacy ICE OEMs. It is encouraging to see the likes of GM, Ford, Volkswagen, BMW, Toyota, Volvo, etc., committing to making zero-emission cars which will eventually account for 100% of their production.
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