By Jack Van Hecke
The Chevrolet Bolt electric vehicle starts at $27,495. Ford’s electric F-150 is priced at $49,995. The Rivian R1S costs upwards of $78,000. The list of American-made EVs goes on and on, and the prices go up and up.
Meanwhile, foreign automakers are prioritizing building vehicles at a lower price point. The Chinese company BYD, which stands for Build Your Dreams, currently has five models marked lower than $15,000. The Seagull is an astonishing $11,400 — less than electric bicycles by Trek, the high-end American bike manufacturer. BYD’s e2 compact SUV model is priced at around $12,507. The Dolphin costs $14,500.
These vehicles are not yet available in America, primarily because of U.S.-imposed trade barriers. On May 14, President Joe Biden announced that he is quadrupling the tariff on Chinese-made EVs from about 25 percent to 100 percent to protect American-made companies from foreign competition. The U.S. argues that the Chinese government is subsidizing EV production, allowing its manufacturers to dump products in both the U.S. and Europe at prices below what it costs to build them. Between 2009 and 2022, the Chinese government provided an estimated $173 billion in tax breaks and subsidies to companies like BYD, NIO and Wuling. Between 2018 and 2022 alone, BYD received $3.5 billion from the Chinese government.
U.S. tariffs and incentive policies — including a $7,500 tax break for car buyers who purchase U.S.-made EVs — are intended to support American manufacturers. However, the high prices of American-made EVs suggest that automakers could be missing out on what might be, potentially, their largest market: Gen Z car buyers.
The target market for electric vehicles is consumers aged 18 to 29, according to consumer surveys, a generation that is particularly concerned about climate change. Over half of the people in this age range say they are somewhat-to-very likely to go electric, according to Statista. But the current price point of EVs is the greatest factor standing in the way of these wannabe EV buyers. The average income of individuals 20 to 34 hovers around $45,994, according to a Forbes study. The national average estimated by the U.S. Census Bureau’s 2022 American Community Survey puts the number at $41,804 per capita.
That is less than the $50,798 average cost of an American-made EV.
“The rule of thumb in the auto industry is that your annual income should be two times the price of the car,” said Micheline Maynard, author of multiple auto-industry books and a Boston Globe columnist covering the car industry. “So, if you look at two times the price, it means you probably have to earn $125,000 a year” to afford the average price of an American-made EV, she explained.
Take Dody Gonzalez, an 18-year-old factory worker at Amazon. Gonzalez, who makes $18 per hour, or about $20,000 annually after taxes, has been shopping for an EV for months. Gonzalez said he is “searching for any brand that’s just cheap,” but said he can’t afford the cars currently on the market.
The price of BYD EVs would be perfect for Gonzalez, he said. If they were available in the U.S. market he would “jump” at the chance to buy one, said Gonzalez, adding that the car’s design is “actually pretty gorgeous.”
The Chevy Bolt is the cheapest American-made EV. And while other foreign-made cars by companies like Volvo, Mini Cooper, Volkswagen and Kia offer cheaper EVs than U.S. manufacturers, their prices begin in the mid-$20,000 to upper-$30,000 range. The Volkswagen ID.4, which is priced at $39,735, qualifies for the $7,500 tax incentive because it is produced in Tennessee. Similarly, the Nissan Leaf qualifies for a $3,750 partial tax incentive because 60 percent of the battery’s components are manufactured or assembled within the U.S. and it has a seven-kilowatt hour capacity. These are requirements under the new Inflation Reduction Act.
Despite high prices, Americans are hungry for EVs. In 2023, Americans — most of them middle-aged white men — bought a record 1.2 million EVs.
But with the number of EVs on U.S. roads expected to surge to 145 million by 2030 — a nearly 15-fold increase over the number of electric vehicles on the road today — U.S. automakers risk losing out on their potentially biggest market: 18-to-29-year-olds, who number 58 million, according to the census.
For one thing, U.S. automakers may not be able to count on trade policies keeping the Chinese cars out for long. BYD already is looking to expand manufacturing into Mexico. “They are hoping that if they can build vehicles there — they’re built in North America — then they can be sold in America” under the United States-Mexico-Canada-Agreement (formerly NAFTA), said Jeff Gilbert, a long-time automotive reporter for Detroit’s news radio station WWJ. Because of USMCA, Chinese companies manufacturing in Mexico could find a loophole around high tariffs.
If Chinese cars enter the U.S. market, American car manufacturers might have to relearn the painful lessons of the 1970s and 1980s. Following the oil shock of the 1973 Yom Kippur War and the 1979 Iranian Revolution, Japanese car makers flooded the U.S. market with inexpensive small cars, even as American automakers stuck to making bigger, more expensive — and less fuel-efficient — models. As the quality of Japanese cars increased, U.S. automakers faced record losses and Chrysler (now Stellantis) came close to bankruptcy — and was bailed out by the federal government. Before long, Toyota had surpassed General Motors with the highest market share in the U.S. (Today Toyota’s market share is a close second to General Motors.)
“I imagine there will be a similar trajectory with Chinese vehicles,” said Jerry Davis, professor of business and sociology at the University of Michigan and author of The Vanishing American Corporation. “They might start just being the low-cost option because you can’t afford other vehicles.”
While Davis is not making any predictions about the long-term prowess of Chinese car manufacturers, he said that American companies should be worried. “If they’re not worried, they’re not paying attention,” he said.