Energy Transition

Why electric cars are getting pricier even as batteries get cheaper

A person charging an electric vehicle

Batteries are the most expensive component of an electric vehicle. Image: Unsplash/dcbel

Nicolás Rivero
Writer, Quartz
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Energy Transition?
The Big Picture
Explore and monitor how Automotive and New Mobility is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Automotive and New Mobility

  • The average cost of an electric vehicle (EV) battery has fallen by 80% in the past 10 years.
  • But the average price of an EV in the US has risen more than 80% over the same period.
  • This is because manufacturers are developing luxury EV models before expanding into cheaper, mass-market vehicles – a typical approach with new technology.
  • Semiconductor shortages and factory shutdowns during the pandemic have also driven up the price of all cars.

Battery prices have fallen precipitously over the past decade. Since batteries are the most expensive component of an electric vehicle (EV), analysts expected that EV prices would decline as well, making them affordable for more people.

It hasn’t quite worked out that way.

Since 2012, the average total cost of an EV battery fell more than 80%, while the average price to buy a new EV in the US rose more than 80%. The main reason for the almost perfect divergence of EV and battery prices is that most automakers are developing luxury EV models before expanding into cheaper, mass-market vehicles. Semiconductor shortages and factory shutdowns during the pandemic have also driven up the price of all cars, both gas-powered or electric.

Discover

What is the World Economic Forum doing about circularity and the automotive industry?

A chart showing change in average price of new US electric vehicles and lithium-ion batteries since 2012
The price of electric vehicles seems to be rising while the cost of batteries declines Image: Quartz

“It’s very common for automakers to deploy any kind of new technology on more expensive cars first, because [luxury car buyers] can bear the price,” said Cox Automotive executive analyst Michelle Krebs. Once carmakers ramp up production volume and bring down costs, they introduce those features on more affordable models. “We saw that with antilock brakes, we saw that with stability control systems, all the new safety features,” Krebs said. “Those things came first on luxury cars and then moved on down the line.” Now, we’re seeing the same dynamic play out with electric vehicles.

The EV market shifts toward luxury cars

The Nissan Leaf was the first widely sold electric car in the US—and it was relatively affordable. In 2011, the car had a sticker price of about $33,600, and it accounted for over 95% of the US electric car market. But the next year, the EV market changed: Tesla introduced its first breakthrough hit, the Model S luxury sedan, which started at $57,400 for the cheapest version. The Model S soon displaced the Leaf as the best-selling electric car, and Tesla’s luxury vehicles, including the Model 3 sedan and the Model X SUV, now dominate the EV market.

A chart showing the US market share of the three leading electric car models
In 2018, the market share of the Nissan Leaf and the Tesla Model S, was considerably lower than the market share of the Tesla Model 3 Image: Quartz
Have you read?

Other automakers, including established players like Ford, GM, and Honda, and startups like Rivian, are muscling their way into the EV market with high-priced pickup trucks and SUVs. Automakers are also using bigger, more expensive batteries to give their EVs a longer range. Tesla’s market dominance, combined with rival automakers’ expensive models and the rise of bigger batteries, has driven up the average price of a new electric car considerably compared to the Nissan Leaf’s heyday. EV prices these days track closely to the average price of a luxury vehicle.

A chart showing the average price US buyers paid for a new electric car vs. a new luxury car
The average price US buyers paid for a new electric car in 2012 sat below $40,000 dollars before jumping to over $50,000 dollars in late 2012 Image: Quartz

In the short run, there are enough wealthy car buyers in the US to buy as many electric cars as automakers can produce. Companies like Tesla and Rivian have months- or years-long waitlists for new orders. But high prices deter people from switching from a gas-powered car to an EV. For the US to meet its goal of electrifying all personal cars, it will need automakers like Honda and GM to make good on their promise to introduce more affordable EV models by the end of the decade.

Loading...
Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

How maximizing green finance flows to developing countries could tackle global warming 

Arjun Dutt

July 11, 2024

About Us

Events

Media

Partners & Members

  • Sign in
  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum