High prices for electric vehicles dampen green-energy hopes

At Washington’s annual auto show this past week, Shawn Strayhorne and his father made a beeline for Ford’s F-150 Lightning.

Peering into the electric pickup’s front trunk—a cavernous storage space that doubles as a cooler, located where the gas-guzzling engine used to be —they declared themselves impressed. But Strayhorne said he wasn’t ready to be “an early adopter” of a vehicle that ranges from $56,000 to $100,000.

“In the future, this will go down in price. Right now it’s a little too difficult and expensive to buy,” he said. Sporting an Air Force veteran cap, his father, Ronald Strayhorne Sr., said it was best to wait until the truck has a longer track record. “Let others do the tryout,” he said.

Their wait-and-see approach, shared by many at the show, could undermine a centerpiece of the Biden administration’s green-energy agenda: a push to have plug-in vehicles make up half of new vehicle sales by 2030. Electric car sales rose sharply last year to claim 5.4 percent of the U.S. market, with many models attracting long waiting lists of buyers. But consumer worries about high prices, sparse charging infrastructure and the risks of road-testing new technology are still obstacles to mainstream acceptance, analysts and car buyers say.

New federal tax credits up to $7,500 for electric vehicles built in North America could help juice demand. But the administration is still working out the fine print on which vehicles qualify, leaving many consumers and auto dealers confused. And the incentives come after an eye-popping leap in auto prices over the past two years that has pushed many buyers out of any vehicle market, electric or gas-fired.

The average new car sold for $49,507 in the U.S. at the end of last year, but the average fully electric car cost 24% more—$61,448, according to data provider Kelley Blue Book.

“These high vehicle prices are becoming out of reach for most consumers,” Charles Chesbrough, senior economist at Cox Automotive, told a conference in Detroit this month, referring to all cars, including electric.

As more EV models hit the market, there are signs that competition is softening prices—a trend some analysts think could accelerate in the coming months. EV giant Tesla has slashed prices on several occasions in recent weeks as rivals cut into its market share in the United States and overseas. “Tesla price cuts usher in the great EV deflation,” a Morgan Stanley research note declared this week.

Making electric cars an easier reach for the masses remains a major pillar of U.S. green energy policy. The Biden administration and supporters in Congress are directing tens of billions of dollars to the project over the next decade, calling it key to boosting American manufacturing and cutting greenhouse gas emissions in half by 2030.

“Realistically, there are some things that concern me about getting to the [EV] volumes and market share we are aiming for,” said Brett Smith, an analyst at the Center for Automotive Research in Ann Arbor, Mich.

For its part, the Biden administration is armed with counterpoints to combat upfront EV sticker shock. Michael Berube, deputy assistant secretary for sustainable transportation at the Energy Department, said in an interview that tax credits will lower the initial costs for many Americans, while new battery technology will drive down EV costs over time. He also talked up the long-term savings of going electric.

“You get the savings of course on the maintenance—40 percent lower maintenance and repair cost. And the cost to fuel a car is tremendously lower,” he said. “If you were to fill up a typical car today, it’s $49 for a gas car, $14 if you are charging at home and around $27 if you are fast-charging outside . . . to go the same distance.”

Big automakers remain optimistic and are investing tens of billions of dollars to launch dozens of EVs in the coming months.

At the Detroit automotive conference this month, Dan Nicholson, a General Motors vice president, rattled off all the electric models the company plans to launch in the coming months, including a Silverado pickup, a Cadillac Celestiq and an Equinox SUV. GM says the Equinox will start at $30,000. More choice of low-priced models, including the roughly $27,000 Chevy Bolt EV, will help lure consumers, he said.

“We think when you give customers a choice, [demand] is going to be higher than many people think,” Nicholson said.

Rod Lache, managing director of Wolfe Research, also expressed hope that competition and incentives in the recently passed Inflation Reduction Act will lower EV costs. In addition to the tax credit for buyers, the law gives generous tax breaks to U.S. manufacturers of vehicle batteries. If some of those savings are passed on to consumers, prices on some models could fall significantly, he told the conference.

However, apart from price, another big problem could be looming, Lache said. Lack of charging infrastructure—and frequent reports of broken chargers—continue to plague electric car owners. “You could potentially damage the industry for some time if that’s not addressed soon,” he added.

The White House aims to address that problem with the bipartisan infrastructure law signed by President Joe Biden in 2021, which provides $7.5 billion to subsidize construction of EV charging stations. The federal government has begun distributing that funding to states, which will significantly improve drivers’ experience, Berube said. “The network that is out there today hasn’t seen the benefit of these funds yet,” he said.

Range and availability of charging stations were among the top concerns that auto-show attendees cited. Elka McIntyre of Rockville, Md., said her husband wanted to buy a fully electric Kia EV6, but she nixed the idea because their apartment building lacks charging. The couple just ordered a Kia Sportage hybrid instead.

“I think there is a lot of work to do to make it more accessible—not just for charging but just price-wise,” she said of EVs. “For the average person in the U.S. it’s just not affordable.”

Checking out a blue Chevy Bolt EV, retired D.C. resident Ed Smith said he wants to go electric but is most concerned about cost. “I think EVs are overpriced right now. I like the technology but the price is frankly more important to me,” he said.

The Bolt, like other EVs assembled in North America and priced under certain thresholds, qualifies for the $7,500 tax credit, a perk that Smith said would make the car affordable to him. But he expressed uncertainty about how long the car will qualify for the full credit, given that the Biden administration is still finalizing rules about how much of a vehicle’s battery must originate in the United States or certain friendly nations. The Treasury Department has said it will propose the new rules in March.

“The incentives are going to be changing, probably in the next few months,” Smith said. “Something like this you’d have to buy pretty quickly, by March. And I’m not ready to buy by March.” Auto industry executives say many dealers are also confused on that point, making it hard for them to promote the tax credits to prospective buyers.

GM believes it is “well-positioned” to continue qualifying for tax credits because it is “actively pursuing opportunities to localize as much of the supply chain as possible,” spokesman Matthew Ybarra said.

Smith added that he doesn’t have a garage where he can install a charger, and isn’t wild about the idea of stringing a charging cord from his house to the street, as some of his neighbors have done.

Tenia Gray, a 24-year-old from Baltimore perusing EVs with her grandfather, said she wasn’t worried about finding charging even though her apartment complex lacks it. “I’m looking to change the carbon footprint because I’m just trying to save the environment,” she said.

But most other attendees who spoke with The Washington Post expressed concerns about charging and battery range, even as they checked out electric models and said they wanted to buy one in the future.

Ricki Thomas said he doesn’t want to have to stop for 30 or 40 minutes to charge during the road trips to Florida he takes a few times a year. “We’re interested in these but we just want to see the battery technology advance a little bit,” he said after looking at the Hyundai Ioniq 6. “For a commute car, this is perfect,” he added.