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Government, consumers want lower EV prices, but automakers still pricing high

Kalea Hall, The Detroit News on

Published in Business News

Government officials and consumers want to see cheaper electric vehicles, but automakers are launching expensive options as they work to make these types of vehicles affordable down the road.

The automakers, including General Motors Co. with its "Everybody In" campaign, say they will offer EVs across a wide range of pricing. And, to help speed the transition, they stress the federal government needs to intervene to provide more incentives to customers.

Once simple and purpose-built to lower carbon emissions, EVs are becoming more of an expensive status symbol — understandable, experts say, because these vehicles are not high-volume products. But with their aggressive EV goals, pricing will have to come down below $30,000 if automakers want to move EVs in volume.

"People with money are more likely to be innovators than your average person who goes to work every day," said Warren Browne, an auto supplier consultant and former GM executive who worked at the automaker for 40 years. "Innovators with income want the latest little widget on the market. You start high because you're not going to move elephant volume, so why sacrifice the margin."

When automakers decide they want to move battery electric vehicles at "elephant volume" — when a product sells more than 200,000 vehicles a year, Browne says — they will price EVs 15-to-20% lower than gas-powered vehicles.

Automakers are still in a "learning curve" strategy of just adding in EVs and not replacing the gas-powered options, Browne said. That's why it's OK to price 10-to-20% higher than the current gas-powered equivalent because customers have options.

 

EVs eventually need to be priced lower "because you're not going to have the same build figurations to satisfy the customer. You're still going to have range anxiety. And there's gonna be a whole bunch of other people in the marketplace that are offering their vehicles."

Automakers represented by their trade group, the Alliance for Automotive Innovation, have expressed the need for a government plan to quicken EV adoption by incentivizing customers to buy. GM and Tesla Inc. already have exhausted their allotment of $7,500 federal tax credits a customer can claim for purchasing a new EV.

President Joe Biden's $2 trillion infrastructure plan includes a $174 billion proposal that would boost EV incentives and add 500,000 more charging stations. The plan calls for $100 billion in new consumer rebates, Reuters reported. In a Friday note, Wedbush industry analyst Dan Ives said that "would dwarf the level of tax credits and rebates currently in place for EV vehicles in the U.S. and be a significant bullish catalyst for EV sales domestically over the coming years."

In an interview last week with Yahoo Finance, Transportation Secretary Pete Buttigieg said it's important for the government to incentivize for EV adoption.

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