The transition to electric vehicles (EVs) in the U.S. has gained notable momentum in recent years, with electric and hybrid cars making up a record one in five vehicles sold in 2024. Of these, nearly half were fully electric vehicles. This surge in EV sales is driven by a combination of government incentives, tax credits, and discounts offered by car manufacturers and dealers, making EVs more affordable for many. However, despite these efforts, a large portion of middle- and low-income Americans are still unable to participate in the electric vehicle boom.
One of the key challenges in the adoption of electric vehicles is the disparity in income levels among those purchasing them. High-income households continue to make up the majority of EV buyers, with nearly 43% of EV sales coming from households earning $200,000 or more, according to S&P Global Mobility. This is in stark contrast to the gas vehicle market, where lower-income households contribute more to overall sales. While the Inflation Reduction Act was designed to make EVs more accessible to a wider range of income groups, the reality is that the majority of EV owners still come from affluent backgrounds, leaving middle- and low-income buyers largely excluded.
Limited Access for Lower-Income Americans
The affordability of electric cars is a significant barrier for many lower- and middle-income households. In 2024, the average price of an EV was $55,544, which is almost 12% higher than the average price of gas-powered vehicles. This price gap means that even after government incentives, many potential buyers are unable to afford an EV. For families struggling with basic living expenses or those living paycheck to paycheck, spending $50,000 on a new car is simply not feasible. This leaves electric vehicles as a distant option for most middle-class families, exacerbating the issue of affordability in the automotive market.
Government incentives, such as tax credits, have been implemented to help make EVs more accessible. However, these subsidies have had a limited effect on boosting sales among middle- and low-income households. A study conducted in California, the state with the largest EV market in the U.S., found that reducing EV prices by 10% led to a 21% increase in demand among lower-income buyers. Despite this response, the overall effect on sales was still modest. The high initial cost of EVs, even with discounts, remains a major obstacle for most consumers, and the subsidies are not enough to overcome this issue for many middle-income families.
A major factor contributing to the high price of electric vehicles is the cost of batteries, which constitute the largest portion of an EV’s price. While manufacturers are working on reducing battery costs, this remains a significant challenge. According to experts, battery prices are expected to decrease by half by 2025, which could help lower the overall cost of EVs. However, until this happens, electric cars will likely remain out of reach for a large portion of the population. Carmakers are also hesitant to produce lower-priced models since they are still losing money on many EVs, even at higher price points.
Prospects for Affordable EV Models
Car manufacturers are beginning to experiment with more moderately priced electric vehicle models, hoping to attract middle-income buyers. For example, the Chevrolet Equinox, starting at $33,600, is one of the more affordable EV options on the market, and it is eligible for tax credits. While this is a step in the right direction, experts suggest that more time is needed for these affordable models to become more widely available. It is expected that as battery prices decrease and demand for electric vehicles continues to grow, the prices of EVs will become more accessible to a broader range of consumers.
In order for the U.S. to meet its climate goals and reduce emissions through the widespread adoption of electric vehicles, making EVs affordable is not enough on its own. Middle- and low-income households must also be included in this transition. Additionally, the current EV market is largely designed for homeowners who have access to personal charging stations. For renters and apartment dwellers, this creates a significant challenge. Some European cities have addressed this issue by installing curbside charging stations, and similar measures in the U.S. could help ensure that EV adoption is accessible to all. Policymakers must also consider alternative transportation solutions, such as public transit and car-sharing programs, to ensure that decarbonization efforts reach all Americans, regardless of income.
