Saturday, November 4, 2023

Electric Cars are Still Luxury Goods :-(

More than three years ago, I blogged about EVs being luxury goods. Some 13 months ago, I showed that the Nissan Ariya--the only electric compact SUV with the basic features I demand (all-wheel drive, an openable moonroof, a 360-degree camera, and an EPA range of at least 235 miles)--came with a 52% price premium vis-a-vis a comparable gas-powered Nissan Rogue. That difference put the Ariya solidly in luxury car territory.

In the intervening year, the Ariya has gone from forthcoming to present on dealer lots, and just yesterday Volvo made it possible to configure and price the 2024 XC40 Recharge for the US market. It joins the Ariya in offering the fundamental features I insist on. The XC40 comes in both battery- and gasoline-powered versions, so it makes it easy to measure the cost of going electric.

The intervening year has also seen a big jump in interest rates:

Average 60-month new car loan rate (per

The concomitant reduction in demand for new cars has changed the market. I decided to recheck the EV price premium by again comparing the cost of the Nissan Rogue with the equivalently-equipped Nissan Ariya. This time I checked not just MSRPs, but also prices at I did two searches at The first was nationwide, i.e., for the best price I could find anywhere. The second was "near me," which means within about 100 miles of Portland, Oregon. I then repeated the experiment for the Volvo XC40 (gas-powered) and the Volvo XC40 Recharge (batteries). For the Nissans, my data are for the 2023 model year, because the 2024s aren't out yet. The Volvo data are for the 2024 model year.

This is what I found:

The Ariya continues to have an MSRP about 50% higher than the equivalently-equipped Rogue, and this doesn't change when looking for real cars within 100 miles of me. If I expand my search to the entire country, the price premium drops to 41%, but it still represents a difference of nearly $14,000. It's also an artificial cost differential, because the lowest-priced Rogue is in Arizona, while the cheapest Ariya is in Illinois.

Volvo is a premium brand, so MSRP pricing for its its Rogue equivalent, the XC40, starts 26% higher than the Nissan. Going electric from there (to the XC40 Recharge) demands a relatively modest 26% premium, but the result is 58% above the MSRP for the Rogue. Within the Volvo line, the premium to go electric is only 26%, but the price increase I care about--from an ICE-powered compact SUV of any make to a similarly-equipped EV of any make--is nearly 60%. That's far above the 25% I consider acceptable.

Lest you think I'm not taking government tax credits and rebates into account in pricing the Ariya and the XC40 Recharge, I actually am. Neither qualifies for the federal $7500 tax credit (which is fictional for most people, anyway), and my state's program for EV rebates stopped accepting applications months ago, because it ran out of money.

To me, the most interesting aspect of the pricing data is the smallness of the differential between the Ariya and the XC40 Recharge. Here's the table above with a line added showing the premium you pay for choosing Volvo over Nissan (i.e., the XC40 Recharge over the Ariya): 

Regardless of whether you look at MSRPs or prices at, the Volvo costs no more than 8% more than the Nissan. I've never been able to figure out what makes premium brands premium, but if Volvo has it and Nissan doesn't, I'd expect that to motivate many buyers to choose the XC40 Recharge over the Ariya. 

As for me, I'll continue to bide my time and hope that the EV industry eventually comes out with a compact SUV with the features I want at a price that's no more than about 25% beyond the cost of a comparable ICE vehicle.


OutOfTowner said...

I live here in Taiwan. People drive electric cars here, however most ride around in scooters. A prominent maker is Gogoro and it was quiet popular a while, but now it's sort of becoming a niche. Even though I don't have either, the issue for Gogoro drivers were that it cost twice as much for the same distance, as well as something called "range fear" which was the inconsistency of battery life as you "rented" them from the dealership to make your runs. And it was never the same for any two sets, so you could never guess how far you would make it. With a gas scooter, you always knew approximately how far you had to go +- a few percentage points.

Lucas said...

You may already be aware, but this year brings interesting developments on the tax credit front. One one hand, it's now possible for you to get the credit at the point of sale if you find a participating dealer. On the other hand, the list of EVs that qualify for the $7500 credit has shrunk due to stricter supply chain requirements on manufacturers wishing to have their EV models qualify for the credit. I'm interested to see how common the new point-of-sale method becomes; it has the potential make these EV tax credits more accessible to people, but dealers have to be willing to do the extra paperwork. And hopefully we see manufacturers shift supply chains in order to make more of their models credit-eligible while also continuing to lower manufacturing costs so that some day in the not-too-distant future, EVs won't be luxury goods :)