Automakers from Tesla to Rivian to Cadillac are raising the price of electric vehicles in the face of changing market conditions and rising costs of raw materials, especially critical materials needed for electric vehicle batteries.
Battery prices have been falling for years, but that may soon change. A company predicts that demand for battery minerals will increase dramatically over the next four years, which could push up the price of electric vehicle batteries by more than 20%. In addition, prices of battery-related raw materials have risen due to supply chain disruptions related to Covid and the Russian invasion of Ukraine.
Higher costs are prompting some Electric Vehicle makers to raise prices, making already expensive cars more unaffordable for the average person, raising the question of whether higher commodity prices will slow the Electric Vehicle revolution.
Industry leader Tesla has been working for years to reduce the cost of its vehicles as part of its “secret master plan” to encourage a global shift to zero-emission transportation. But even the company has had to raise prices several times over the past year, including twice in March, after CEO Elon Musk warned that Tesla and SpaceX have recently been swaying over commodity prices and shipping costs. All experienced “tremendous inflationary pressures”.
Most Teslas are much more expensive now than they were in early 2021. The cheapest “standard range” version of the Model 3, Tesla’s most affordable car, now starts at $46,990 in the U.S., up 23 percent from $38,190 in February 2021.
Rivian is another price hike front-runner, but their move isn’t without controversy. The company announced on March 1 that two of its consumer models, the R1T pickup and R1S SUV, will be raising prices significantly, effective immediately. R1T will rise 18% to $79,500 and R1S will rise 21% to $84,500
Meanwhile, Rivian announced new, lower-cost versions of the two models with fewer standard features and two electric motors instead of four, close to the original prices of their four-motor siblings at $67,500 and $72,500, respectively.
The adjustment made a splash: Initially, Rivian said the price increase would apply to orders placed before April 1. But two days later, CEO RJ Scaringe apologized and said Rivian would stick to the old price for the orders already placed.
“In speaking with many of you over the last two days, I fully realize and acknowledge how upset many of you felt,” Scaringe wrote in a letter to Rivian stakeholders. “Since originally setting our pricing structure, and most especially in recent months, a lot has changed. Everything from semiconductors to sheet metal to seats has become more expensive.”
Lucid Group also passed on some of those higher costs to wealthy buyers of its expensive luxury cars.
The company announced on May 5 that prices for all but one version of the Air limousine will increase by about 10% to 12% for U.S. customers who book on or after June 1. Perhaps in light of Rivian’s shift, Lucid CEO Peter Rawlinson assured customers that Lucid will stick to its current pricing for all bookings through the end of May.
Customers who pre-order the Lucid Air on or after June 1 will pay $154,000 for the Grand Touring version, up from $139,000; the Air in Touring trim is $107,400 compared to $95,000; the cheapest Air Pure version is $87,400.
Pricing for the new top trim Air Grand Touring Performance, announced in April, remains the same at $179,000, but despite similar specs, it’s $10,000 more than the limited-edition Air Dream Edition it replaces.
“The world has changed dramatically from the time we first announced Lucid Air back in September 2020,” Rawlinson told investors during the company’s earnings call.
Incumbent global automakers have greater economies of scale than companies like Lucid or Rivian, and won’t be hit hard by rising battery-related costs. They also felt some price pressure, but to a lesser extent passed the cost on to buyers.
General Motors warned on its first-quarter earnings call last month that it expects total raw material costs to hit $5 billion in 2022, double the automaker’s previous forecast.
Ford Motor has made pricing a key element of the selling point of its new F-150 Lightning electric pickup. Last year, many analysts were surprised when Ford said the F-150 Lightning, which recently started delivering to dealers, will start at just $39,974.
Ford said last month it expects commodity headwinds of $4 billion this year, up from an earlier forecast of $1.5 billion to $2 billion.
“We’re going to still keep it for everybody, but we’ll have to react on commodities, I’m sure,” Palmer said.
If the Lightning sees a price hike, the existing 200,000 reservation holders may be spared. Palmer said Ford noted the backlash against Rivian.
The Lyriq and F-150 Lightning are new products with a new supply chain that puts automakers – for now – at risk of higher commodity prices. But for some older EVs, like the Nissan Leaf, automakers have been able to moderate price increases despite higher costs.
Nissan said last month that an updated version of its electric Leaf, will maintain a similar starting price to the car’s upcoming 2023 model. Current models start at $27,400 and $35,400.
“That’s always the first priority,” Papin said. “That’s what we’re focused on doing … it’s true for ICE as it is for EVs. We just want to sell cars at a competitive price and for their full value.”
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