Electric vehicle prices rise at Tesla, Rivian, GM and other automakers
Tesla’s Model 3 at the Tesla store in Washington, DC
Salwan Georges | The Washington Post | Getty Images
Automakers from Tesla to Rivian to Cadillac are raising prices for their electric vehicles amid changing market conditions and rising commodity costs, especially for key materials needed for batteries of electric vehicles.
Battery prices have been falling for years, but that could be about to change. One company predicts a surge in demand for battery minerals over the next four years, which could drive the price of EV battery cells up by more than 20%. This comes on top of already rising prices for battery-related raw materials, due to Covid-related supply chain disruptions and Russia’s invasion of Ukraine.
Higher costs have prompted some electric vehicle makers to raise prices, making already expensive vehicles even less affordable to average Americans and posing the question, will soaring commodity prices slow the electric vehicle revolution? ?
Pass the costs on
Industry leader Tesla has been working for years to reduce the costs of its vehicles, as part of its “secret master plan” to promote a global transition to zero-emission transportation. But even it has had to raise prices several times over the past year, including twice in March after CEO Elon Musk warned that Tesla and SpaceX “see significant recent inflationary pressure” in commodity prices and transport costs.
Most Teslas are now significantly more expensive than they were at the start of 2021. The cheapest “Standard Range” version of the Model 3, Tesla’s most affordable vehicle, now starts at $46,990 in the States States, up 23% from $38,190 in February 2021.
Rivian was another early mover in price hikes, but its move was not without controversy. The company said on March 1 that its two mainstream models, the R1T pickup and the R1S SUV, would get steep price increases, effective immediately. R1T would jump 18% to $79,500, he said, and R1S would jump 21% to $84,500.
Rivian meanwhile announced new, lower-cost versions of both models, with fewer standard features and two electric motors instead of four, priced at $67,500 and $72,500 respectively, close to the original prices of their four-engine siblings.
The adjustments raised eyebrows: At first, Rivian said the price increases would apply to orders placed before March 1 as well as new orders, essentially doubling down on existing reservation holders for more money. But two pushback days later, CEO RJ Scaringe apologized and said Rivian would honor old prices for orders already placed.
“As I speak with many of you over the past two days, I realize and fully acknowledge how upset many of you have felt,” Scaringe wrote in a letter to Rivian stakeholders. “Since our pricing structure was first put in place, and especially in the last few months, a lot has changed. Everything from semiconductors to sheet metal to seats has become more expensive.”
Lucid Group also passes on some of these higher costs to well-heeled buyers of its pricey luxury sedans.
The company said on May 5 that it would raise prices on all but one version of its luxury Air sedan by about 10% to 12% for U.S. customers booking on or after June 1. Perhaps aware of Rivian’s about-face, Lucid CEO Peter Rawlinson assured customers that Lucid will honor its current prices for any reservations made through the end of May.
Customers making reservations for a Lucid Air on June 1 or later will pay $154,000 for the Grand Touring version, up from $139,000 previously; $107,400 for an Air in Touring version, down from $95,000 previously; or $87,400 for the cheapest version, called Air Pure, compared to $77,400.
Pricing for a new top-level version announced in April, the Air Grand Touring Performance, is unchanged at $179,000, but – despite similar specs – that’s $10,000 more than the Air Dream Edition at limited edition which it replaced.
“The world has changed dramatically since the time we first announced Lucid Air in September 2020,” Rawlinson told investors during the company’s earnings call.
Established global automakers have greater economies of scale than companies such as Lucid or Rivian and have not been hit as hard by rising battery costs. They, too, are feeling some price pressure, although they pass the costs on to buyers to a lesser extent.
General Motors raised the starting price of its Cadillac Lyriq EV crossover on Monday, boosting new orders from $3,000 to $62,990. The increase excludes sales of an initial first release.
Cadillac President Rory Harvey, in explaining the uptick, noted that the company is now including a $1,500 offer for owners to install home chargers (although customers of the cheaper first version will also be offered the offer). He also has cited external market conditions and competitive pricing as factors driving up the price.
GM warned on its first-quarter earnings call last month that it expects overall raw material costs in 2022 to be $5 billion, double the automaker’s previous forecast. .
“I don’t think it’s an isolated thing,” Harvey said at a press conference on Monday when announcing the price changes, adding that the company still planned to adjust the price after the debut. “I think it was a number of factors considered.”
The performance and specifications of the new Lyriq 2023 are unchanged from the first model, he said. But the price increase brings it closer to the price of the Tesla Model Y, which GM is positioning the Lyriq to compete against.
Rival Ford Motor has made pricing a key part of its sales pitch for the new F-150 Lightning electric pickup. Many analysts were surprised last year when Ford said the F-150 Lightning, which recently began shipping to dealerships, would start at just $39,974.
Darren Palmer, vice president of global electric vehicle programs at Ford, said the company plans to hold pricing – as it has so far – but is subject to product costs basic “fools”, like everyone else.
Ford said last month it expects $4 billion in commodity headwinds this year, down from a previous forecast of $1.5 billion to $2 billion.
“We’re still going to keep it for everyone, but we’ll have to react on the commodities, I’m sure,” Palmer told CNBC in an interview earlier this month.
If the Lightning sees a price increase, the 200,000 existing reservation holders will likely be spared. Palmer said Ford took notice of the backlash against Rivian.
Established supply chains
The Lyriq and F-150 Lightning are new products, with new supply chains that – for now – have exposed automakers to rising commodity prices. But on some older EVs, like the Chevrolet Bolt and Nissan Leaf, automakers have been able to maintain modest price increases despite higher costs.
GM’s 2022 Bolt EV starts at $31,500, up $500 from the start of the model year, but down about $5,000 from the previous model year and about $6,000 less expensive than when the vehicle was first introduced for the 2017 model year. GM has yet to announce pricing for the 2023 Bolt EV.
Nissan said last month that an updated version of its electric Leaf, which has been on sale in the United States since 2010, would maintain a similar starting price for the vehicle’s upcoming 2023 models. Current models start at $27,400 and $35,400.
Nissan Americas President Jeremie Papin said the company’s pricing priority is to absorb external price increases as much as possible, including for future vehicles such as its upcoming Ariya EV. The 2023 Ariya will start at $45,950 when it arrives in the US later this year.
“It’s always the first priority,” Papin told CNBC. “That’s what we’re focused on…it’s true for ICE as it is for electric vehicles. We just want to sell cars at a competitive price and at full value.”