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Tesla, GM and Ford Want to Sell More EVs. But Can Consumers Afford Them?

Electric vehicles were always a costly premise for both automakers and consumers.

Four years back Tesla's  (TSLA) - Get Tesla Inc. Report charismatic Chief Executive Elon Musk had offered customers a lower cost, mid-range Tesla Model 3 sedan priced at an affordable $35,000. 

That price point is an unlikely proposition in present day.  

The Model 3 Rear-Wheel Drive now costs nearly $47,000.

Earlier this week, Tesla however announced price hikes across its entire range of vehicles to offset rising raw material prices. It was the electric vehicle maker's second price increase this month, in response to rising inflation that has pushed the price of nickel, a key component in EV batteries to record high levels.

Similarly, legacy automaker General Motors  (GM) - Get General Motors Company Report which introduced the electric version of the Chevrolet Silverado pickup truck last year and two smaller, cheaper SUVs has raised its prices. GM's Chevrolet Bolt EUV launched at a starting price of $33,995 is temporarily out of production.

Ford's F all-electric Mustang Mach-E that was launched at a starting price of $43,895 now costs $46,375 and the E-Transit all electric commercial van at an entry level comes for $43,295 

The company is not planning any immediate price hikes yet but the automaker told TheStreet it was "monitoring volatility in raw material and component availability and prices."

Chevrolet Bolt Lead JS

GM's EV models are also no where near the prices they were originally set at.

GM plans to launch more electric vehicles in the market this year, the company said during its latest earnings call in February.

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“Higher commodity prices will result in a headwind of about $500 per unit based on current prices compared with year-earlier levels,” wrote Benchmark analyst Mike Ward about General Motors as reported by Barron's.

According to car-shopping website Edmunds, the average transaction price for a new EV climbed to $60,054 in February, Bloomberg reported.

Kelley Blue Book data estimated the rise was even higher. The average transaction price for an electric vehicle is $62,876, according to January 2022 Kelley Blue Book data. That is about $15,000 higher than the overall industry average of $46,404, which includes gasoline-powered vehicles, hybrids and EVs. 

Steep Rise in Gas Prices

Surging fuel prices are prompting more people to consider greener cars but the costs and savings are complicated.

Online shopper visits for energy efficient vehicles, that do not run on gasoline primarily, including hybrids, plug-in hybrid and battery electric cars rose 25% in the four weeks ending March 13, Edmunds data showed. 

Online curiosity for EVs peaked 39% in the week ending March 6 and increased 18% the week before that.

One major factor gas prices. But there’s also an ongoing semiconductor shortage and congestion at ports.

Gasoline prices have soared with the Russian invasion of Ukraine and the response of western nations to isolate the second-largest exporter of crude oil behind Saudi Arabia.

Americans are spending more on gasoline than they were last week, last month and last year — a lot more.

Nationally, the average price of a gallon of regular gasoline was $4.33 on Friday, according to AAA data. That's up 11.4% over the last week, 19.7% over the last month and 34.8% over the last year.