As electric vehicle sales rise year after year, the general consensus is that battery-powered cars should become more affordable; at least that’s what basic economics would suggest.

Unfortunately, things are more complicated than that in some areas of the world. JATO Dynamics’ latest report on the evolution of the electric vehicle (EV) markets in China, the US and Europe, titled “EVs – A pricing challenge,” paints a bleak picture for western markets. Analysis in the report finds that “not enough is being done to produce affordable EVs across several markets.

Why is that so? Well, the report found that EVs prices in the United States and European markets have risen by 38% and 28% respectively over the past 10 years. During the same period, they fell by almost half (47%) in China, the world’s largest market for EVs.

So what did do better than the US and Europe? Obviously, it all comes down to a number of factors, including its government’s decision to invest heavily in the domestic market from as early as 2009 using incentives.

Gallery: Wuling - Hong Guang MINI EV

Today, consumers in China can buy a brand-new EV for as little as €3,700 ($4,350), thanks in part to the economies of scale made possible by the huge market. In contrast, JATO Dynamics data show the average retail price for an EV in the US continues to rise faster than in any other major global market; it currently stands at €36,200 ($43,000), up from €26,200 ($30,750) in 2011.

Things look even worse for European consumers, as the region has the highest average retail prices for EVs in the world. In May 2021, EVs were on average 52% more expensive than ICE cars in the UK, and 54% more expensive in the Netherlands.

The situation is more balanced in Germany, where the average retail price of an EV is €39,755 ($46,700) compared to €36,979 ($43,400) for ICE vehicles. Norway is the only European countries where EVs are more affordable than ICE cars—the average retail price for EVs there is €44,500 ($52,250) compared to €53,000 ($62,230) for ICE cars.

The study also reveals an interesting phenomenon. While China committed to develop affordable EVs, strengthening the market to such an extent that incentives are in the process of being phased out, in the US, tax credits have accelerated the growth of the premium EV market. As a result, lower income buyers were left without EVs they could afford. This may be the source of more potentially bad news for the US and Europe.

“Unless OEMs in Europe and the US find avenues to create more affordable EV offerings, they run the risk of losing their home market advantage to Chinese competitors. In the short term at least, government subsidies and incentives will continue to support EV sales, but for how long remains a crucial question for the industry.”

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