Automakers are seeing reductions in profits and are having difficulties keeping production lines rolling as shortages in raw materials have caused prices to climb and supplies to dwindle.
EV got a $6,250 price bump last week due to rising materials costs, which are up 144 percent from March 2020., but there’s no way around the fact that prices are rising. In May, buyers paid an average of 22% more for a new EV than they did the year before, as the average sale amount climbed to $54,000. To be fair, prices for gas vehicles are on the way up as well, though to a lesser extent. Buyers paid an average of $44,400 in the same period, a 14 percent increase.
Why are EVs becoming so much more expensive so quickly? Well, inflation is a significant part of that, but there are other factors, too. Automakers are pushing EV prices to compensate for the increases they’re seeing in raw materials costs. Some components have nearly doubled in cost since before the pandemic, wiping profits off the boards for even the most popular models.
Finally, it’s hard to expect automakers to loosen prices on a product category with the explosive growth in demand that electric vehicles have seen in recent years. Buyers were chomping at the bit to get new electric models even beforeskyrocketed, and now that the pain at the pump has become extreme, that excitement has grown.
Of course, prices can't keep climbing forever and the early adopters will eventually move on, so automakers will have to balance pricing with costs carefully going forward to maintain demand. Widespread EV adoption will depend on there being affordable and readily available vehicles in the future, so it's a cooling off in pricing will be in everyone's favor.
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