We've seen a lot of headlines in recent weeks about how electric vehicle demand is flagging and forcing manufacturers to scale back production plans. The lack of charging infrastructure has been blamed — as have the vehicles' designs, in some cases. Some have gone as far as blaming political polarization for sales not rising as expected by automakers and analysits alike.
But the reality is there's a simple — and unfortunately, probably intractable in the short term — issue pushing otherwise amenable buyers away from EVs. To put it in one-syllable words: They cost too damn much.
EVs are priced outrageously for what you get
Let's look at General Motors, for starters. The first EV on the Ultium platform was the GMC Hummer EV — a "moonshot" that was supposed to whet initial early adopters' appetite for an EV while also offering a super-cool vehicle with broader American appeal. In practice, though, what it emphasized for buyers was that EVs were going to cost well over $100,000 ... and have a waiting list so long, manufacturers wouldn't let you join it.
Of course, that was supposed to be the lead-off effort, a halo vehicle with technology that would trickle down to more affordable models. So, how is the democratization of Ultium technology going? Well, Chevy is just now rolling out the Blazer EV. The absolute base LT model starts at $56,715 ... for a midsize five-passenger Chevrolet.
Meanwhile, Chevy's smaller Equinox EV — once billed as starting around $30,000 — will start at $34,995 ... at least, when it eventually goes on sale. The only trim available at the start is the 2RS, which starts around $53,000 if you want all-wheel-drive (which most crossover buyers do). All while Chevy is killing off its affordable EVs, the Bolt and Bolt EUV; the brand has vowed they will return, but pricing and specs remain to be seen.
Ford, meanwhile, is in the midst of responding to tanking demand for the electric F-150 Lightning. The most probable reason for that drop-off: earlier in 2023, Ford jacked the base price of the truck by around $20,000. So the barebones Pro model with 230 miles of range was starting above $60,000, after beginning at a little more than $40,000 just two years earlier at launch. Prices have been reduced since (at least temporarily), but we're still at the point where a reasonably equipped F-150 Lightning starting just under $70,000 is considered a deal.
But the Mustang Mach E is only $42,995, you say? Well, yes — but let's dive into what that means. Borrowing money is very expensive right now, thanks to the Federal Reserve's run of interest rate hikes. I ran the numbers for a base Mach-E Select model (250 miles of range, RWD) with no options added. Leasing that for a standard 36 months with a 10,500-mile-per year limit is $601 per month with a $4,594 down payment. Amortized out, the total price is over $700 monthly — again, to lease the most basic, shortest-range model available.
And that's before we get into the luxury realm, where Mercedes is wondering why it's having trouble selling EQ models that look like potatoes and are often priced well past $100,000.
All of this is particularly jarring when compared to the price of these EV's combustion-powered equivalents. Where the Chevy Blazer EV starts at $56,715, the gas-powered Blazer starts at $36,795 — which means the electric car carries a 54-percent premium over its ICE sibling. The Equinox EV starts about $34,995, while the gas-powered one starts at $26,600 — the EV is 32 percent pricier. The F-150 Lightning XLT with Extended Range battery starts at $71,635; a crew cab short bed 4x4 F-150 XLT with the top-shelf PowerBoost hybrid V6 starts at $56,185, making the Lightning 28 percent more expensive.
The EV tax credit is convoluted to the point of not mattering
Currently, the $7,500 federal EV tax credit is applied to next year's taxes, so you won't see the results for up to a year and a half. It's non-deductible, so you have to owe money to Uncle Sam come tax time to get it. It's income-limited, so you must to earn less than $150,000 individually or $300,000 as a couple to be eligible. And that's all before we get to the requirements that dramatically limit how many vehicles the credit can be applied to, due to a byazantine, Manchinian web of standards related to where a vehicle is built and where it gets its batteries from. (And that's not even to dive into the mess of individual state and municipality tax credits and offers found across the nation.)
Come 2024, things may become a bit easier; next year, dealers may be able to offer the credit directly to buyers at the time of sale.
But leasing is a loophole now, right? Well, yes, it can be. But there's no obligation for dealers and manufacturers to offer the $7,500 off in the lease. And even if they offer it, there's nothing stopping them from jacking the prices up beforehand to account for it.
EVs are especially hard to afford for younger people
Generally speaking, younger people are more left-leaning and concerned with issues like climate change. They aren't as set in their ways. They should, in theory, be more receptive to electric vehicles. But EVs are particularly hard for them to afford.
Young families? The EV that can serve as a primary family car — in today's world, that means a three-row SUV or minivan — doesn't really exist yet at an affordable price point. The Rivian R1S starts at $78,000 ... but only in silver paint, and with the small battery pack. Kia is launching the EV9. The brand described its pricing as a "wake-up call" for the industry, but the EV9 still starts at $63,900 if you want all-wheel-drive. (By the way, the excellent, similarly-sized gas-powered Kia Telluride starts at $37,355.)
What about the tax credit? Well, it's tough to apply to families. If you own a home, you receive a mortgage interest deduction. If you have children, you receive a deduction for that and deductions for what you spend on child care. It's hard to be within the eligible income bracket, be able to afford an EV and owe $7,500 or more on your taxes.
The steep cost of down payments for an EV lease is probably not so bad if you're trading in a vehicle, which will likely cover that and get you cash back. But if you're buying your first vehicle, it's a ton of money to put down to lease a car for three years.
Will EV prices go down in the future?
There are hopeful signs for the intermediate to long-term future. EV production methods will get more efficient with time, of course, and R&D and supply chains will become less expensive. Meanwhile, brands like Toyota are not just working on super high-performing batteries that can offer greater range per pound, but also less costly batteries.
But for now, it's hard to see the incentive to turn a greater return on EV investments lessening in the immediate term. Which means prices aren't likely to come down any time soon ... much to buyers' (and the world's) detriment.
