Are automakers overcharging consumers for electric vehicle batteries?

Abstract

Given the recent slowdown in EV adoption rates in many countries despite decreasing battery prices, a better understanding the relationship between battery and EV prices is critical for industry and policymakers. We fill this gap in the literature by assessing to what extent ongoing increases in EV battery capacities have increased EV prices, and how this compares with actual EV battery prices. Specifically, we use fixed effects regression analysis to investigate the responsiveness of EV list prices to changes in battery capacity over time, finding evidence that increases in battery capacity led to increases in EV prices that are substantially greater than estimated EV battery costs over our sample. This suggests that automakers may be overcharging consumers for EV batteries and that recent decreases in battery prices are not fully benefiting consumers. This, in turn, suggests that EV prices have been higher than they otherwise could have been, which may have led to slower EV adoption in recent years.