With petrol prices in the US topping $5 a gallon for the first time, the one vehicle that can alleviate pain at the pump — an electric car — is experiencing its own bout of runaway inflation.
Car makers pressed by consumer demand and rising material costs are charging more for electric vehicles across the board.
Market leader Tesla is boosting sticker prices by as much as $6,000 a car, its third increase this year, Electrek reported. Ford Motor has raised the price of its Mustang Mach-E, following a similar move by electric vehicle start-up Rivian Automotive.
And yet the buyers still keep coming.
“We’ve seen an actual acceleration in demand” at Rivian since the boost on March 1, Claire McDonough, its chief financial officer, said at a Deutsche Bank conference on Thursday.
“We had 10,000 new pre-orders with a $93,000” average selling price, she said.
The average price of an EV reached $60,984 last month, well above the $46,634 mark for the overall market, automotive researcher Edmunds reported.
That average excludes Tesla, which doesn’t share pricing data with research firms, but Electrek reported that the popular Model Y long-range model now starts at $65,990, up from $62,990.
“There is growing interest in EVs because of the gas shock, which has been going on for months and shows no signs of abating,” Jessica Caldwell, Edmund’s executive director of insights, said in an interview.
“Along with growing demand, there is very limited supply. And if anyone is going to absorb these costs, it’s probably someone looking at an EV, who generally has a higher income.”
Ms McDonough isn’t the only car executive saying that EV buyers continue to accept higher prices, even as the broader market is starting to push back on inflationary sticker prices.
“If there’s one area where I do think we have some capability to price left, it’s on our electric vehicles,” John Lawler, Ford’s chief financial officer, said on Wednesday at the Deutsche Bank Global Automotive Conference.
“So far, the pricing is sticking.”
Beyond demand, car makers are boosting EV prices because of runaway raw-material costs, which Ford sees as a $4 billion headwind for the company this year. Chief executive Jim Farley recently said it now costs $25,000 more to build a battery-powered Mustang Mach-E than a petrol-fuelled Edge SUV.
Mr Lawler said higher costs have wiped out EV profits at Ford.
“It’s not just gratuitous, take-advantage-of-the-market type of price increases,” Ms Caldwell said.
“We are seeing commodity costs going up, including the mining costs for everything that goes into an EV.”
Boosting prices is one approach car makers are taking to get EVs back in the black as demand surges. Ford also is re-engineering the Mach-E on the fly to reduce cost and improve margins.
EV price inflation also is being stimulated by the continuing semiconductor shortage, which has crimped the supply of battery-powered models because they require more chips than traditional cars.
That led Tesla chief executive Elon Musk to declare in an internal memo this week that the car maker had endured a “very tough quarter” due to supply constraints, despite delivering a record 310,048 vehicles in the year’s first three months.
“We need to rally hard to recover,” he wrote.