Why EVs are still so expensive that they're driving up the cost of all new cars

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MW Why EVs are still so expensive that they're driving up the cost of all new cars

By William Gavin

Major automakers are still struggling to scale their electric-vehicle businesses

Major automakers are still struggling to scale their electric-vehicle businesses.

Major automakers from Ford Motor Co. $(F)$ to Hyundai Motor Co. (KR:005380) are slashing prices and offering deals on their electric vehicles in a bid to get consumers to drop their gas guzzlers.

Yet drivers still largely pay a premium for EVs, in part because they're still costly for most companies to make.

The cost of a new electric vehicle hit $58,124 last month, according to Kelley Blue Book. That's up from August, but down slightly from the same time last year. Kelley Blue Book's parent firm, Cox Automotive, noted that the price premium that EVs command over traditional vehicles kept pace at $9,070.

Higher prices for EVs is part of what drove up new-car prices overall to $50,080 on average last month - marking the first time ever that metric has breached $50,000, according to Kelley Blue Book. The firm best known for its vehicle shopping guides said that higher sales of luxury vehicles and electric vehicles drove the increase, estimating that EVs accounted for a record 11.6% of U.S. vehicle sales in September.

The data show that EVs are still more costly on average than gas-powered vehicles, "and also that new cars in general have just become quite expensive," said Corey Canter, research director at the Zero Emission Transportation Association, who noted that affordability is one of the most common barriers keeping consumers from buying an electric car.

The overarching problem is that most automakers aren't able to achieve economies of scale, said Stephanie Valdez Streaty, director of industry insights at Cox Automotive. That means it costs companies more to make each car, which translates into higher prices for consumers.

The market isn't quite there yet on the demand side, either. Just nine out of the 90 EV models that registered U.S. sales last quarter sold more than 10,000 units, according to Cox Automotive.

Meanwhile, only four dedicated EV brands have reached operational profitability, according to research firm Rho Motion. Only one, Tesla Inc. $(TSLA)$, is based outside of China, which has heavily invested in its local EV industry and is home to the world's biggest auto market. Meanwhile, traditional automakers such as Ford have recorded major losses from their electric divisions.

Battery costs pose challenges

Part of the challenge in making electric vehicles more affordable is that drivers want cars and trucks with a longer battery life, which requires bigger and more costly batteries. An EV battery can account for as much as 40% of a vehicle's total cost because they're made up of expensive materials like lithium or cobalt, which can cost thousands of dollars per ton. And bigger, heavier, more expensive batteries are often needed to meet consumers' demands for range.

Broader adoption of EVs could help lower prices for consumers by driving down the cost per vehicle for automakers, but many drivers are still hesitant to go electric over worries that they'll be left without a place to charge. The most common reason why consumers are unwilling to buy an EV is concern over charging availability, industry experts say. More than half of the respondents in a May study from J.D. Power cited charging availability when asked why they would reject EVs.

"Consistently, month after month, year after year, the No. 1 reason for EV rejection has been the availability of public charging," said Brent Gruber, who leads J.D. Power's electric-vehicle practice. "That has changed very little over the last several years."

The industry has responded in two ways: working to expand charging networks and improving their vehicles' range. Between 2011 and 2024, the median range of EVs offered for sale in the U.S. quadrupled, from 68 miles to 283 miles, according to federal data. Of course, that's required bigger, more expensive batteries.

Still, it's possible that costs could come down in the near future because battery prices have been falling. According to a December BloombergNEF study, prices for lithium-ion battery packs dropped 20% in 2024, reaching $115 per kilowatt-hour. Major automakers like General Motors Co. $(GM)$ are also investing in new batteries that would use more common, less expensive minerals such as manganese or sodium.

Beyond the sticker shock

Despite a costlier sticker price, going electric could save drivers money over the lifetime of their car.

The average age of a vehicle in the U.S. is now 12.8 years, S&P Global Mobility reported in March. That leaves a lot of time for consumers to spend on gas and maintenance - and that's where EV ownership can be easier.

"The one thing that we always try to tell people is you can't focus too much on the purchase price of the vehicle, because the cost of ownership is where the difference comes in," said Gruber.

The biggest advantage an EV has is that it doesn't need gasoline, which tends to be more expensive than electricity. In 2023, Energy Innovation, an energy- and climate-policy think tank, found that every EV is cheaper to fuel up than a gas-powered vehicle.

For example, Nissan Motor Co.'s (JP:7201) $(NSANY)$ 2025 Leaf electric hatchback model starts at $28,140. Over the course of 13 years - roughly the age of the average car on U.S. roads - that Leaf would cost its owner $62,939.

That's according to the U.S. Energy Department, which hosts a vehicle cost calculator on its website that factors in the estimated cost of fuel, tires, maintenance, registration, licensing, insurance and loan payments

Over the same 13 years, Kia Corp.'s (KR:000270) 2025 Soul model, which starts at $20,290, would cost its owner slightly more at $63,320, according to the Energy Department, while Toyota Motor Corp.'s $(TM)$ (JP:7203) Corolla compact car would cost $23,630 to start and more than $64,000 across the same period of time.

-William Gavin

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October 18, 2025 08:30 ET (12:30 GMT)

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