Electric battery costs are rising in proportion to inflation and unstable geopolitical climate. But manufacturers are determined to roll out affordable electric cars as major automakers move towards modernizing their fleet with some of the cheapest electric cars.
Although fears of electric battery shortages loom over the horizon, automakers are doing their best to ensure affordable electric cars do not go out of style.
What are EV batteries so expensive?
Key metals needed to make an electric battery are lithium, nickel, and cobalt. Often these minerals are in short supply and manufacturers depend on imports to meet their demands.
Add to it supply chain issues and an unstable global economy, the price of an electric battery has escalated considerably.
In recent years, the price of an electric battery had reduced as production rose around the world. But recently, there has been an acute shortage of lithium. And batteries cannot be made unless sufficient lithium is available or mined. Experts believe that the expected price surge will drive up the price of affordable electric cars in 2026. It can go up by anywhere between $1,5000 to 3,000 for each vehicle.
Auto executives have repeatedly warned about shortages and called for more mining. As the world moves towards carbon-neutral practices, EVs are a big part of reaching that goal. In July 2020, Tesla CEO Elon Musk had urged the mining industry to focus on nickel production. At the time, he had promised, “Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way.”
By May 2022, the price of lithium had gone up by nearly 900% within a span of 18 months.
Affordable EVs and Automakers
The rising price of electric batteries have not deterred automakers from trying to win over customers. Last week, General Motors (GM) announced that their Chevrolet Equinox, a midsize SUV crossover, will have a starting price of around $30,000 and a range of 250 miles per charge. For an additional charge, you can add an extra 50 miles.
The average cost of an electric vehicle in the US is supposedly around $65,000 according to the list published by Edmunds.com. General Motors will reveal the exact price of the Equinox EV only towards the second half of 2023, when it is expected to hit the market.
Industry analysts have praised GM for offering a range of $300 miles at approximately $30,000. They believe this will work to motivate gasoline-powered vehicle owners to shift to EVs. Ivan Drury, director of insights for Edmunds.com told LA Times that the price point is a sweet spot that can lure additional buyers to give EVs a go. “You’re basically at the price point that everyone is clamoring for.”
Analysts are keeping their fingers crossed when it comes to the Equinox SUV. Nearly 20% of all new vehicles sold in the US are compact SUVs. An affordable electric car that meets the demand for price, luxury, and efficiency could turn the tide in their favor.
Meanwhile, another top-seller The Toyota RAV4 is the gas-powered variant that retails at a starting price of around $28,000. Earlier, EVs were mainly aimed at the affluent segment with even the base version of a Tesla Model 3 priced closer to $50,000. The larger Teslas go as high as $120,000.
However, the trend is changing and affordable electric cars are being built to woo a new generation of buyers. The Nissan Leaf and Chevrolet Bolt are EVs with starting prices under $30,000 while the Mini Cooper Electric, Mazda MX-30, and Hyundai Kona Electric hover in the $30,000 range.
Some EVs are also supposed to be considerably cheaper after the Inflation Reduction Act goes into effect. The Kia Niro EV, Hyundai Ioniq 5, Ford F-150 Lightning pickup, Volkswagen ID.4, Kia EV6, Toyota bZ4X, Ford Mustang Mach-E, Audi Q4 e-tron, Subaru Solterra, Polestar 2, and Tesla Model 3 have prices starting in the $40,000s.
Automakers are keeping prices low to attract customers using gasoline-powered vehicles towards EVs. Major carmakers have pledged to considerably revamp their production lines towards the electric segment by the next decade.
While Tesla continues to be the dominant player in the EV market, GM’s CEO Mary Barra has been quoted as saying that the automaker will work to become the largest seller of EVs by the middle of the decade.
