Take It or Leave It: Is Buying an EV in 2022 Worth it?

Take It or Leave It: Is Buying an EV in 2022 Worth it?

Written by: Zach Prestegaard 

The dawn of electric vehicles (EVs) has left consumers wondering if switching to a more sustainable energy source for their transportation is worth it. Even before the pandemic, conflicts in other parts of the world, and inflation, EVs were becoming a serious competitor in the automotive industry. However, with today’s price levels increasing with seemingly endless supply chain issues and shortages, the consumer question of the value of EVs is even more influential in their purchasing decisions. 

Yes, the price levels of goods have been rising, but is the price of EVs strictly due to inflation? In 2022, “the sale price for an EV, on average, was $60,054 in February” (Einstein). This is higher than the $56,312 average sale price for EVs in 2021 (Giovanetti). Tesla alone has experienced price increases of up to $12,000 overnight. Their cheapest model was intended to be $35,000 but is now sitting at over $50,000 after taxes, fees, etc. Other companies have just launched their EV models, which leads to higher initial prices as they achieve economies of scale. This fact alone makes Tesla a great example due to their high production rate and less volatile pricing pre-pandemic. 

The plan with EV companies was to slowly bring the price down as more consumers bought into the concept of sustainable energy, but record shortages and inflation have made this task extremely difficult for auto manufacturers. I would blame not only inflation, but also aggregate supply and aggregate demand for these somewhat extreme price increases in EVs.

Aggregate supply, specifically commodity prices, are a major part in the price increases of EVs in general in 2022. The development and production of already expensive batteries has only become more expensive, with nickel being “up 67.2% just today, representing around a $1,000 increase in the input cost of an average EV in the US” (Rosevear). The same article informs readers that most batteries are made up of upwards of 60% nickel. The graphs below shows the exponential increase in the price of EV battery components in just the last 2-3 years.

While some may question the reason for such a dramatic increase, we must consider multiple factors such as the difficulty of mining nickel (and other elements used in batteries), the sudden increase in overall competition in the EV industry, as well as previous supply chain shortages that may be influencing the price today. Generally speaking, companies allocate these resources via a contract, which would not change the price for the life of the contract. But, if contracts have come to an end, businesses providing the resources have the ability to raise prices, whether it’s to make up for losses during the previous contract or to break even in current times. Including that, controversy over cobalt mining, specifically, has left EV manufacturers trying to move to different resources, which only adds to the cost of producing these batteries. Added cost, when considering an aggregate supply and demand graph, leads to decreased aggregate supply and a higher price level in the end for the consumer. 

Along with aggregate supply, aggregate demand has also been a catalyst in EV price increases. Today’s rising gas prices makes households who own an EV feeling lucky to be saving money on transportation, and those who don’t own EVs feeling left out. Consumer expectations have changed over the past few years and have become more optimistic. This optimism is driven by more options for EVs, longer range batteries coming to the market, as well as faster public charging becoming available across major highways in the US. Optimistic consumers, coinciding with rising oil prices, lead to major spikes in demand that, as of today, puts consumers on waitlists that are up to 18 months long. Of course, this increase in aggregate demand resulted in price level increases.

With these two factors, along with many other considerations such as comfort, fun factor, and practicality, it’s difficult to give a blanket answer to whether or not purchasing an EV in 2022 is worth it. My opinion lies with buying EVs, as the new technology, long-term gas savings, along with interesting features make an EV unlike anything you or I have experienced before! While the upfront costs are much, much greater than the likes of combustion vehicles, the economic and financial benefits present themselves later on in ownership.

Works Cited

Barhat, Vikram. “Tesla Has Inflation Problems, Too. Metals Prices Are Soaring.” Barron's, 8 March 2022, https://www.barrons.com/articles/tesla-evs-inflation-metals-nickel-prices-51646744059. Accessed 10 April 2022.

Eisenstein, Paul A. “Will owning an electric vehicle save you money?” NBC News, 16 March 2022, https://www.nbcnews.com/business/personal-finance/will-owning-electric-vehicle-money-rcna20256. Accessed 10 April 2022.

Giovanetti, Erika. “Electric vehicle sales hit record high in 2021, KBB reports.” Fox Business, 22 February 2022, https://www.foxbusiness.com/personal-finance/cost-of-electric-vehicles-record-high-sales. Accessed 12 April 2022.

Rosevear, John. “Nickel price surge could threaten automakers' EV plans.” CNBC, 8 March 2022, https://www.cnbc.com/2022/03/08/nickel-price-surge-could-threaten-automakers-ev-plans.html. Accessed 10 April 2022.