Electric cars are mostly liked by electric car owners nowadays. But we should also need to keep track of battery cost on average which is affordable. But why are cheaper electric cars coming despite high battery costs?
The main 6 reasons for the cheaper electric vehicles coming despite higher prices can be said to be to attract a large buyer market segment, competition, market demand, government subsidies, and federal tax credits. Let’s see the top 6 reasons why cheaper electric vehicles coming despite high battery costs.
- Large buyer segment
- Federal tax credits
- Switch the buyers
- Beat the competition
- Satisfy market demand
- Government policies
1. Large Buyer’s Segment
EVs are known to be targeted at luxury buyers with luxury facilities. The EVs which target the normal segment have limited ranges and facilities. There can be a higher demand for vehicles that are affordable and with a good amount of features.
The question is how much a company can focus on just a small luxury market segment. If the company wants to have a big coverage, the mainstream buyers are the right choice.
This segment is significant. Getting control over such a large segment can make any company a winner. To attract this market segment, cheaper vehicles are coming despite higher battery costs.
Despite higher battery prices, companies are finding ways how they can bring new cheaper electric vehicles, and as it is said if there is a will, there is a way.
2. Federal Tax Credits
As part of the inflation reduction act, federal tax credits play an important role in the EV market. GM is also trying to qualify for the all parameters of federal tax credits.
Steve Majoros, vice president of marketing for Chevrolet talked about this, “We’re working through the rules and the regulations right now. We think it’s all lining up nicely, but more details to come on that.”
According to the federal tax credits the batteries have to be assembled in North America, built in America, and mined and recycled in America.
Most of the raw materials such as lithium come from china and other countries. The Equinox fulfills the North American Assembly parameter. Also, GM has announced a joint venture with companies from the U.S., one is operating already in Warren, Ohio.
While there is no clarity on where the GM will make the battery. Equinox EV if qualify all the parameters will get qualified for federal tax credits of $7500.
Federal tax credits are seen as an opportunity by automakers and thus they are betting on the steps such as cheaper electric vehicles. This is another reason why cheaper vehicles are coming despite high battery costs.
3. Switch Buyers Away from Gasoline Vehicles
Another well-satisfying reason for the cheaper electric vehicles is that this is the key to getting mainstream buyers switched from gasoline vehicles to Electric cars. A large segment of the market still uses gasoline vehicles.
The various factors responsible for that are price, ease, and safety issues. Gasoline vehicles are easier for people to buy as they are easy to refill, they are easily available, and cheaper and there is proper awareness about them.
While the EVs are expensive. They are not cheaper enough. The batteries cost more. There is a lack of awareness regarding their use.
- The switch from gasoline to EV
The one way to switch these mainstream buyers to EVs is to provide electric vehicles at the price near to the gasoline vehicles, with all the facilities that a normal vehicle has.
The Equinox EV has enough cargo space for the gas, and comparable passenger space, to new interior packaging methods. It is similar to the SUVs in that price range and also provides a good range of 250 miles per charge, at the price slightly higher than gasoline ones.
This enables buyers to think of a better option within the price range.
4. Competition
Another reason for the cheaper electric vehicles coming despite high battery costs is competition. The competition makes it possible. The Current EV market is competitive and will be more and more competitive in the future.
Every day new modifications and improvements are coming to Electric vehicles. The demand is also rising. But the pricing makes it difficult for mainstream buyers.
Electric Vehicles Available in the $30000 Price Range
The only electric vehicles under $30000 are versions of the Nissan leaf and Chevrolet Bolt, smaller than a typical SUV. Mini cooper Electric, Mazda MX30, and Hyundai Kona Electric are also at this price, Edmunds says.
While other ones close to these prices are Tesla Model 3, Hyundai’s Ioniq 5, the Volkswagen ID.4, Kia EV6, the Toyota b24x, Audi’s Q4 e-Tron, the Subaru Solterra, Ford’s F-150 Lightning pickup, Polestar 2, and Kia’s Niro EV, Ford’s Mustang Mach E which start from $40000.
The below table shows the prices of various electric car models with MSRP from $25000-$55000.
| Model | Starting MSRP |
|---|---|
| Tesla Model 3 | $46,990 |
| Hyundai Ioniq 5 | $23600 |
| Volkswagen ID.4 | $37495 |
| Kia EV6 | $41400 |
| Toyota b24x | $42000 |
| Audi’s Q4 e-Tron | $52700 |
| Subaru Soltera | $46220 |
| Ford’s F-150 Lighting Pickup | $34085 |
| Polestar 2 | $48400 |
| Kia’s Niro EV | $24690 |
| Ford’s Mustang Mach E | $42895 |
The competitor tesla has price ranges much higher. The base version of the Tesla Model 3 starts at $48000 while its MSRP is $46990, and another model X SUV starts at $120000. Now the question is are these vehicles targeted at mainstream buyers? Most of the buyers are luxury buyers.
There is a large market segment, that can be targeted for Electric vehicles. And cheaper electric vehicles are capable of driving that buyer volume to the company. Companies are looking for more and more buyers and cheaper electric vehicles can generate much demand for the company models. The competitors always want to stay ahead of one another in that.
The Tesla Takeover Statement
GM equinox at just $30000 is considered as the step to disrupt the market and competitors. Previously, GM CEO Mary Barra has said that the company will overtake Tesla as the nation’s largest seller of EVs by the middle of this decade. We can consider cheaper electric vehicles are a step toward that.
5. Market Demand
Though mainstream Buyers are satisfied with gasoline vehicles, EVs are also in demand. What if electric vehicles come at the price of gasoline vehicles? The demand will be more than the current demand for EVs.
Already the EV sales rose 68% from the same period a year ago from the Equinox announcement. The equinox will be available in 2023, the demand may rise when this SUV comes to the market. The Automakers may have found their target audience and the demand.
But there are chances that due to high demand and lack of resources, the prices of the equinox may go up. How GM will manage to maintain the equinox EV cost to $30000 is a question.
“It is longer, wider, and a bit shorter than the gas versions of the same vehicle,” said Majoros, from Equinox EV. “GM used new interior packaging methods to create comparable passenger and cargo space to the gas Equinox” He continued.
“It does a lot of things right. So when it does that, the volume follows.” He continued, reports Chron.
The mainstream demand that GM has identified, is maybe the reason why GM is going to make a Cheaper Electric Vehicle. If demand for cheaper vehicles gets rises and the automakers put cheaper and cheaper vehicles on the market, can make a difference.
6. Government Policies and Incentives
As part of the zero-emission goal, many countries are now committed to replacing gasoline vehicles with electric ones. Electric vehicles are called green cars.
Zero Emission Goals
To accelerate the use of more electric vehicles on the road, governments have made several policies for electric cars. Both automakers and buyers get benefits from the incentives provided by governments.
Federal Tax Credits
Federal Tax credits are a recent example. The GM is working on qualifying for EV tax credits of $7500 for Equinox EVs. The vehicles can get cheaper the Federal tax credits.
Subsidies and Tax Exemptions
Including the US Other countries like china are providing subsidies for electric vehicles. These subsidies make them get exemption from various taxes and thus the companies get motivated to produce more and more EVs.
The obvious fact is that as more EVs will be produced there will be thought of mainstream buyers and the prices will go down. Cheaper vehicles are necessary for the reduction of emissions and climate change control.
Government subsidies and incentives can also make it possible. The initiatives by governments are also the main reason for the cheaper electric vehicles coming despite the higher battery prices.
Why are cheaper electric vehicles coming while battery prices are higher?
A few months ago, it came from GM that an electric version of the Chevy Equinox, a small SUV is coming soon. Which competes with other SUVs in its segment. Though the exact price of the Equinox EV is yet to be announced, it has been already said that it will be starting at $30000.
It is not like electric vehicles are coming at cheap prices for the first time. Cheaper electric vehicles were still there but with a limited range. Here Equinox EV is said to be comparable with the gasoline SUVs in its price range.
An electric Equinox small SUV at a price range of $30000 with a range of 250 miles per charge is a big step. The cost of an Average EV is $65000, and the $30000 SUV makes it to the low end of the price. At $30000 Equinox is said to provide 250 miles of range per charge and can get 300 miles of range for some extra pay.
There are several reasons why the EV giants such as GM are looking forward to cheaper EVs. Here is a Decode.
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Challenges For the Cheaper EVs
There are certainly challenges in providing cheaper EVs to the market. The market is highly sensitive and any decision of the EV giants makes a significant impact on the whole market. The cheaper electric vehicles are a big deal. Still from General Motors cheaper vehicles are coming in the future despite the current high battery prices. Experts question how GM will manage to keep the price to $30000 for Equinox EVs.
Battery and Resources
Though battery prices are falling, still they are making electric cars expensive. The prices are still very high than a normal mainstream buyer can afford. The resources that are used for electric car batteries are expensive.
Also, there is a soft war for control over the resources. See how china’s control resources are used to make the batteries.
Lithium, which is a core component of electric vehicles, there fewer reserves of it and the demand is high. Cobalt, nickel, and graphite the resources are also in high demand but these earth metals are less and needed to be processed. The mining, refining, etc process makes the batteries cost more and thus Electric vehicles.
Demand
“Even if GM can keep the Equinox starting price around $30,000, demand likely will be high enough so the company builds mainly higher-priced versions. And some dealers have been marking up EVs beyond the automaker’s sticker price due to high demand.” Says Ivan Drury, director of insights for Edmunds.com.
These are some challenges for cheaper electric vehicles to come into the market. But there is always room for possibilities and ways.
Conclusion
The main reasons for the cheaper electric vehicles coming despite higher prices can be said to be to attract a large buyer market segment, competition, market demand, government subsidies, and federal tax credits. The federal tax credits and government subsidies are the main reasons for the cheaper electric vehicles. Also, market conditions and competition plays an important role.
FAQs
Are EVs Cheaper than Gas?
The EVs are cheaper than gas on a maintenance basis. Electric vehicles have low maintenance costs than gasoline vehicles in long term.
Why the Cost of Electric Car Batteries is High?
The cost of electric car batteries is high because the resources used to make the electric car battery are expensive. The reserves are fewer and the demand is high.
What is the Estimated Cost of the Equinox EV?
The estimated cost of the Equinox EV is said to be $30000 for the base model.
Will Electric Vehicles Become Cheap?
Electrical vehicles will become cheaper with constant engineering efforts, and competition. They will become affordable, say reports.
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