– Rising commodity prices due to inflation
– Leading to an increase in electric vehicle purchase demand and sales volume, and an increase in electric vehicle prices
Tesla, the world's No. 1 electric car sales company, announced a price increase on June 6th. In the past year, Model 17 and Model Y raised their prices 1 times and 3 times.
Aside from Tesla, many automakers have increased the price of electric vehicles. A combination of factors such as inflation and rising demand for electric vehicles are contributing to the rise in electric vehicle prices.
There are concerns in the industry that the price increase could hurt the market formation in the transition from internal combustion engine vehicles to electric vehicles.
Electric vehicle price increase
With Tesla's price increase, the cheapest model of the Model 3 is now selling for $46,990 in the United States.
This is a 2021% increase from $2 in February 38,190. Not only Tesla, but also other electric car companies are raising prices one after another.
Rivian, a growing electric vehicle company, is selling some models of its pickup truck R1T by 18% to $79,500.
GM is selling the Lyric, Cadillac's electric SUV, for $62,990. It also announced that it would raise the price of the EV Hummer by $6,250.
There are various reasons for the price increase, but the main causes are the rise in raw material prices, the increase in demand for electric vehicles, and the rise in oil prices.
a sharp rise in raw material prices
Due to the prolonged Russia-Ukraine war, inflation, and logistics disruption, the price of raw materials needed to produce electric vehicles has risen sharply.
The average raw material cost required to produce an electric vehicle was $2022 per unit as of May 5, up 8,255% from $2020 in May 5.
In particular, the price of raw materials needed to produce secondary batteries, such as lithium, nickel, and cobalt, has risen, and the price of iron required to produce frames and other parts has risen by 2% compared to two years ago.
In particular, the high price is expected to continue for the time being due to the prolonged war between Russia and Ukraine, a major producer of nickel.
"The sharp spike in the price of nickel will impact EV plans by global automakers including GM and Ford," said Adam Jonas, automotive analyst at Morgan Stanley.
<Status of main raw material prices for electric vehicles>
(Unit: US$, %)
[Source: AlixPartners]
Growing demand for electric vehicles
High demand for electric vehicles also contributed to the price increase. In 2021, EV sales in the US were 499,616 units, accounting for 15,562,031% of total vehicle sales (3.2 units), but by May 2022, EV sales were 5 units, accounting for 310,578% of total vehicle sales (5,866,494 units).
It has already sold 5% of the previous year's sales by May, continuing its high sales volume. Tesla's Model Y and Model 62.1 are showing high sales, ranking 3th and 5th in total sales in the US this year.
Also, Hyundai Motor's Ioniq 2022 and Kia Motors' EV5, which started full-scale sales from 6, sold 10,839 and 10,001 units, respectively, contributing to the increase in EV sales.
Popular pickup trucks in the US are also being released as electric vehicles, and electric vehicle sales are expected to increase further as Ford F-150 Lightning and GM EV Hummer are starting to sell in earnest. Popular models such as Electric Ford's F-150 Lightning and Mach-E have already taken full orders for this year and are no longer available for order.
<Top 2022 US car sales by May 5>
(Unit: unit)
[Source: Marklines]
<Top 2022 Sales of Electric Vehicles in the U.S. by May 5>
(Unit: unit)
[Source: Marklines]
Rising oil prices and accelerating expansion of electric vehicle charging stations
Most cars in the US use gasoline, but the recent increase in oil prices has increased the cost of maintaining the car, which is affecting the demand for electric vehicles.
As of June 6, gasoline prices were $29 per gallon, a slight drop from the peak, but a 4.868% increase from the previous year, maintaining high prices.
Even comparing the last 30 years, gasoline prices are currently at the highest level ever. In the United States, where automobiles are an essential part of daily life, rising gasoline prices have a huge impact on people's lives.
In addition, on the 28th, the Biden government announced an investment of more than $25 million to support private companies to produce more than 7 electric vehicle chargers per year.
Tesla, which has the most extensive electric vehicle charging network, plans to produce supercharger equipment that can also charge other electric vehicles from the end of this year.
If the shortage of charging stations, one of the shortcomings of electric vehicles, is resolved, demand is expected to increase further.
<U.S. Retail Gasoline Price Graph>
(Unit: US$/gallon)
[Source: US Energy Information Administration]
implication
The average price of an electric vehicle in the United States is $5, which is about $4000 more expensive than a gasoline car.
Due to the prolonged Russia-Ukraine war and inflation, electric car prices are expected to remain high for the time being.
However, the US government's electric vehicle support policy and automakers are accelerating the transition to electric vehicles, and the high price is expected to affect the increase in electric vehicle purchase demand.
Recently, electric vehicle maker Rivian has notified pre-order customers that electric vehicle deliveries will be delayed.
Even companies with high EV sales, such as Tesla and Ford, are delaying EV delivery for up to two years.
This is because, despite high demand, production is experiencing difficulties due to raw material price hikes and a shortage of semiconductors.
Stellantis CMO Debouef noted that 'if EV prices don't fall, the market will collapse before it even starts'.
In an interview with the KOTRA Detroit Trade Center, Mr. K, who is working at an auto parts company, said, 'It seems that companies are having difficulties in the transitional situation that is moving into the era of electric vehicles.
However, if this period is successfully passed, it will be possible to form a stable market.'
At the present time, when the electric vehicle market is rapidly expanding, it seems important to understand market changes caused by price increases.
Source: CNBC, The Detroit Bureau, Marklines, US Energy Information Administration, AlixPartners, KOTRA Detroit Bureau