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The affordable electric vehicle is still largely fantasy

With a tight battery supply and enthusiastic customers, car companies are only launching expensive EVs.

Jack Norton, a history professor in Minneapolis, started buying an electric vehicle early last year. His demands were simple: four-wheel drive and a price tag of less than $55,000.

Initially, Norton noticed that few EVs were being shipped to Minnesota, where auto companies face looser emissions mandates than much of the US. So he expanded his search to other states — and then came the sticker shock. The scarce electric models Norton could find at dealerships were only available in premium finishes and at prices well above the starting prices he had seen in advertisements and product launch presentations.

“You know what vaporware is – when someone advertises great new software that doesn’t really exist?” he asks. “That’s what happens in EVs.”

Much has been written about unctuous car salesmen adding “market adjustment fees” to take advantage of the current imbalance between vehicle supply and demand. But while that’s certainly a problem, most electric machines are pushed to the level of luxury cars much sooner — even before they leave the factory. In July, the average starting price in the US for a battery-powered vehicle – the figure displayed in car ads and marketing materials – was $47,636. However, the average sticker price for EVs actually made and shipped to dealers was $61,251, nearly a third higher, according to Edmunds. It’s not that car companies don’t have affordable electric cars; it’s just that they don’t make them, opting instead for more lavish (and profitable) versions.

The biggest differences between the promised starting price and the available stock are clearly visible in the most popular models. Kia’s EV6, a hot-seller of late, had an average sticker price in July of nearly $54,200, 32% above the starting price Kia has been crowing about since the car’s launch. The pragmatic Chevrolet Bolt — said to be the most affordable EV in the US at $26,595 — sold for nearly a third more this summer, averaging $34,874.

John Fitzgerald Weaver, who lives in Boston and builds commercial solar farms, had to go to Long Island to find a Hyundai Ioniq 5 without four-wheel drive — the only variant under $47,500. “When I saw they had it, I thought, ‘Dear, I’m buying this today,’” he says. It didn’t matter that the car came with an additional $1,000 fee, and wouldn’t arrive for more than a month.

Of course, there is a healthy economy behind all of this. According to Edmunds analyst Ivan Drury, it is probably the first time that the companies that make and sell cars have more demand than supply. Increasing supply takes time, especially with new technology like electric powertrains, and car companies are rushing to add assembly lines and source batteries. In the meantime, they are driving up prices.

That dynamic is compounded by the fact that so many of the current parade of EVs are brand new. In the months after a new vehicle debuts — gas or electric — companies tend to prioritize enthusiast versions with advanced features, in part because early customers are the most eager and wasteful.

Perhaps nowhere is this tension more apparent than at Ford Motor’s Rouge complex just west of Detroit, where the company is stocking both gasoline F-150 pickups and the battery-powered version called Lightning. Ford hopes to have the capacity to make 150,000 Lightnings per year by the end of 2023, but currently supplies about four or five times as many gas-powered F-150s. While the Lightning could theoretically be bought for as little as $40,000, it sold for more than double that amount on average in July. Ford said via email that the cheaper “pro” version of the electric pickup is limited to one in five trucks on the assembly line as it rushes to clear an overflowing order book.

General Motors, meanwhile, has promoted the story of affordable EVs again this month, unveiling an electric version of its Chevrolet Equinox SUV that will reportedly sell for just $30,000. “To get a large number of EVs, you have to reach the mainstream market,” CEO Mary Barra told Bloomberg Television.

Drury of Edmunds thinks it will be at least two years before a critical mass of battery-powered cars will be sold at that price. “Under $30,000, that’s the dream,” he says, “but it seems almost impossible.”

For now, customers are not really hesitating. The spread between starting and sticker prices is also huge for gas-powered cars these days, although more pronounced for EVs, which are 30 to 40% more expensive on average. Electric car buyers are already generally more affluent, and with car loans lasting as long as eight years, many feel comfortable buying more expensive variants or stacking expensive options.

“It sort of selects itself,” Drury says. “You already have people who have the means to buy a vehicle and if this is their first time in an EV… they will see it as a milestone purchase.”

But affordability is arguably the biggest hurdle left when it comes to the more widespread adoption of EVs that will be needed to curb emissions. Despite several dozen mainstream electric models that have hit the market in recent years, a large number of Americans still can’t afford to make the switch. The average price of EV stickers in July was also well above the $55,000 threshold for cars to qualify for the latest round of federal tax breaks.

Hyundai, for its part, noted via email that most of its new vehicles tend to attract customers interested in additional features, even at higher prices. Right now, the company says 38% of the Ioniq 5 models it makes are the base variant, a share that is expected to increase “with the normal progression of the buyer’s lifecycle stages.”

However, this logic does not scan with Norton. He believes that car companies should have made an earlier effort to expand electric car production and suspects that car drivers are simply trying to squeeze profits out of gas engines while they still can. “The argument that car companies make is essentially ‘capitalism works,'” he says. “But I teach economic history and what I see are artificial constraints.”

Norton gave up buying a full EV a few months ago and settled for a hybrid Honda CR-V. It was packed with a ton of options he didn’t care about, but still came out at about $46,000. Plus it was available – sort of. “Last we heard,” Norton says, “they’re building it this week.”

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