Automakers Raise Prices for EVs as the Cost of Raw Materials Skyrocket

Long-running supply chain challenges have caused the cost of raw material costs for electric vehicles to have more than doubled in the past two years.

The result: Automakers have significantly raised prices on new EV models.?

GM recently announced it would raise the price of its electric Hummer by $6,250. The automaker blamed higher prices for parts, technology and logistics. Tesla, Rivian, Lucid and others previously announced notable increases in the starting costs of their EVs.

Americans are paying $54,000 on average for an EV, a surge of 22 percent in a year, according to research by JD Power.

Average raw material cost for an EV totaled $8,255 per vehicle as of May, up 144 percent from $3,381 per vehicle in March 2020, led by materials such as cobalt, nickel and lithium, all of which are required for the production of batteries used to power EVs.

Raw material costs for traditional vehicles with internal combustion engines have also roughly doubled during that time period to $3,662 per vehicle, up 106 percent from an average of $1,779 per vehicle in March 2020. That uptick is being led by increases in steel and aluminum.

The cost spikes come as automakers aggressively launch new EVs over the next several years.?AlixPartners predicts the number of EV models available on the global market to increase from 80 last year to more than 200 by 2024.

As a result, AlixPartners expects the higher costs to force a relative slowdown in EV launches, as automakers move away from pushing electric vehicles to market as quickly as possible and refocus on profitability.

The EV price spike is causing a headache for motorists who want to ditch fossil fuel-powered cars to avoid record gas prices. The average cost of regular gas was last put at $4.90 a gallon by the American Automobile Association, down from above $5 earlier in June but well up from $3.10 a year earlier.

Online searches for EVs have increased 73 percent since January, according to data from auto-shopping websites Kelley Blue Book and Autotrader, per The Wall Street Journal.

EVs represented 4.5 percent of U.S. car sales in 2021, according to the International Energy Agency. Meanwhile, Americans are paying $44,400 on average for fossil fuel-powered vehicles, representing a gain of 14 percent in the year to May, research by JD Power found.

Dean Barber is the principal of Dallas-based BBA, offering objective insight to economic development organizations and companies.?Our?national network of esteemed consultants?finds practical and tactical solutions that work.?Need a speaker? Email Dean at [email protected] And subscribe to the Rising Tide, a weekly newsletter for business people and economic developers.