The automotive industry has entered a fiercely competitive phase in the electric vehicle transition, and it’s producing an intriguing result for US car buyers: the first long-range EVs that are cheaper to buy than the average gas-powered car.
At least three manufacturers — Tesla, Hyundai-Kia and General Motors — now offer EVs with more than 300 miles (480 kilometers) of range for less than the cost of the average new vehicle sold in the US, according to an analysis by Bloomberg Green. The most affordable is Hyundai’s 2024 Ioniq 6, which comes with 361 miles of range and a price tag that’s 25% below the national average of roughly $47,000.
Over the past six months, competition between US auto brands has taken on a Squid Game vibe, as pressure rises to make EVs affordable and attract a new wave of buyers. Customers have become more savvy about battery range, charging speeds and charger accessibility, and are rejecting vehicles that don’t justify the sticker price — something automakers have started to acknowledge.
Affordability is key
The industry has begun “a challenging period, very chaotic, very Darwinian,” Carlos Tavares, chief executive officer of Stellantis NV, told investors at a Bernstein conference last week .
Stellantis, which has been slow to offer electric models in the US, will launch a $25,000 electric Jeep “very soon” as part of a large-scale EV offensive, Tavares said. “Affordability is the key success factor right now. If you want the scale to materialize, you need to be selling BEVs to the middle classes.”
Tavares said the only winning strategy is to offer EVs at comparable upfront prices from the start, even if it requires sacrificing profit margins during the transition phase. He warned that car manufacturers and suppliers will have to reduce costs drastically.
“It’s not ‘Watch out, there is a storm coming,’” Tavares said. “We are in the storm, and this storm is going to last a few years. It’s going to put a number of companies in trouble.”
EVs for everyday people
EVs as a whole are still expensive to buy, with prices averaging about 15% more than a typical US car, according to data from Cox Automotive. That’s partly because early EVs were disproportionately aimed at the luxury end of the US market. Until recently, the few affordable models on offer were hobbled by insufficient battery range and slow charging speeds. That started to change as battery technology matured and the urgency rose to achieve economies of scale.
Some new models are beginning to break through the affordability barrier, said Stephanie Valdez-Streaty, director of industry insights at Cox Automotive. “Price is going to continue to be one of the top barriers for adoption, but the EV premium is shrinking and that’s a good thing,” she said.
The standard bearer for long-range EVs with an affordable price may well be the new electric version of the Chevy Equinox. The SUV comes with 319 miles of range for around $42,000, before federal tax credits that can knock $7,500 off the price. Those incentives will drop the cost of a base model, available later this year, below $28,000. Chevy will follow the Equinox with a new Bolt that GM says will be “the most affordable vehicle on the market by 2025.”
Prices for new EVs and gasoline cars are similar enough that federal incentives can make up the difference. Complex rules for which cars and customers qualify, however, make it difficult for shoppers to evaluate their options. That isn’t the case for car leases, though, with dealers receiving the EV tax credit. Some are passing it along by automatically wrapping the savings into the monthly lease payment. As a result, the cost of leasing long-range Hyundai and Tesla EVs is as much as 37% lower than leasing similar gas-powered models made by Toyota and BMW.
EV price parity is difficult to measure. Determining what constitutes gas-car equivalence varies from driver to driver. The switch to a slow-charging EV with 200 miles of range would be a significant burden for someone who travels long distances, but it could be a convenience upgrade for a shorter-distance commuter who charges at home while they sleep. In the US, 300 miles of range has emerged as a benchmark for where the advantages outweigh the disadvantages for most drivers.
A stricter definition of price parity is the point at which the average EV costs the same as the average internal combustion engine, excluding gas savings and government subsidies. That upfront affordability is key for the later stages of widespread adoption, especially in lower-income countries, according to the International Energy Agency.
American car buyers demand more range from electric vehicles than drivers in any other country. The average EV now comes with about 300 miles, and with a few of those models selling for less than the average car, others will surely follow. The IEA says price parity will be the norm by 2030.
