EV’s Next Battleground: The Entry Level Model
The segment’s success will determine how fast we will switch to electrification
The story of the modern electric vehicle starts at the bottom, not the top.
When the first pure battery cars rolled out a decade ago, the aim was to mass market them, make them affordable for everyone. The early cohort — Nissan Leaf, Mitsubishi iMiev, Ford Focus Electric — wanted to compete with mid-market internal combustion models, with their 40K price tags and government incentives.
It turned out that nobody — or very few — wanted a “cheap” EV. They had terrible range, even worse design, and little infrastructure to support them.
It took the premium halo — and pricing — of Tesla to tip the scales for electric mobility. In the last two years, we have seen a whole range of Model S / 3 aspirants pitched to consumers, from the Ford Mustang Mach-E to the Audi e-Tron to the Polestar 2.
Most industry watchers now agree that the upper tiers of vehicle ownership will switch over to EVs pretty quickly. I wouldn’t be surprised if battery-powered cars reached a third of premium / luxury sales by 2025 in North America. In my opinion, electric IS the new premium.
OEMs know — both legacy and startup — that they have a strong enough pipeline to woo the top 5%. Now they want to win over the rest of us.
Do Automakers Dream of Electric Cheap?
Ford CEO Jim Farley recently highlighted affordable EVs as a key priority for him at a recent conference.
“I’m deeply worried about affordability. Average people cannot afford these vehicles and we have a lot of work to do to make them more affordable. That’s the one that keeps me up at night.” — Ford CEO Jim Farley, Detroit News
Turns out Farley is not the only one.
The race to build inexpensive but competent electric vehicles for the masses is heating up fast. Almost all OEMs are targeting the segment labelled variously as “affordable”, “entry-level”, and so on.
As expected, legacy, mass-market automakers lead the charge here. Nissan has always skirted around the affordable mark with the LEAF. Now it has gone a step further by dramatically slashing pricing for its 40kwH, 150-ish mile 2022 LEAF variant. The new version will cost $27,500 — the cheapest among all established OEMs. With incentives, the price drops to $20,000.
General Motors, which already makes arguably the bestselling “affordable” EV — the Chevy Bolt, has gone even more “budget”. Its 2022 Bolt 1LT model costs only $31,000. Surprisingly, it also comes with a decent range of 250 miles.
The enthusiasm for affordability is also coming for unexpected quarters. BMW-owned MINI Cooper now has a $29,900 EV. Volkswagen recently showcased its ID.Life concept, which the German automaker aims to position as a low-cost electric SUV.
Even the upstarts, despite their exclusivity, want in on the game. Both Tesla and Lucid Motors are apparently working on $25,000 models.
Riding the Affordability Curve
A decade ago, “affordable” EVs arrived as strategic faux pas. But battery prices — which account for about a quarter of the price of an EV — have dropped by 90 percent since then. Estimates show that with further price declines, EV could become cheaper than gasoline cars with the next 3–4 years. That will be the primary driving force behind the upcoming rush for entry level EV models.
GM’s Bolt may not be profitable now but the company is seeing engineering advances every year, allowing it to drive “cost of out of the system.” What one would expect from GM, and others, are longer battery ranges, better designs and improved charging infrastructure with lower sticker prices.
OEMs are also making other strategic moves to root out costs. Everyone from GM to Stellantis to Toyota has announced plans to nearshore battery production to North America, ending dependence on Chinese and South Korean supply chains. The battery plants will not only address growing volume and geopolitical uncertainties, given China’s heavily lopsided share of production, but will also help these automakers manage costs.
Some are also toying with battery chemistry to bring down prices. Both Mercedes-Benz and Tesla wants to move to lithium-iron-phosphate batteries in order to cut down on reliance on cobalt and nickel, which are expensive to procure. Both companies want to use these batteries specifically in cheaper vehicles with shorter, but passable, ranges.
Going forward, the speed of these cost reductions, and the resultant lineup of competent, affordable models, will determine how quickly North Americans ditch gasolines. Tesla’s upscale swagger may have kicked the door wide open for green automotive, but the humble, “affordable” EV will inherit the earth.
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