To sell an EV, put a $420,000 price tag on it

Torsten Muller-Otvos, former Rolls-Royce CEO, with the company’s all-electric Spectre. (Source: Bloomberg)

The global electric-vehicle market shows signs of fatigue, characterised by ongoing price wars, declining sales and costs that are still too steep for most consumers. At the other end, however, luxury automakers’ embrace of new-energy vehicles has proven to be a boon for high-priced models.

Take Rolls-Royce, the epitome of British upper-class extravagance. Its Spectre, list price $420,0000, is billed as “the world’s first ultra-luxury electric super coupe.” After launching in October 2022, the first models rolled out of the company’s plant in the English countryside in the second half of 2023, helping the storied carmaker sell a record 6,032 cars for the year. Crucially for Rolls-Royce, which tends to attract an older clientele, the all-electric vehicle is luring younger buyers to its elite brand and helped the company secure orders for the next two years.

Unfortunately for Tesla Inc. and its Chinese rival BYD Co, between them the world’s two-largest pure EV makers, the mainstream market is in a funk. While BYD shipped a record 526,000 EVs in the fourth quarter, net income slumped from the prior period, a sign of the sacrifice it made to keep sales rising. That struggle will continue into 2024 as the country braces for a second consecutive annual slowdown in electric-car sales, according to the China Passenger Car Association. Tesla also missed earnings estimates and warned of “notably lower” growth this year, as carmakers reach the limit of cost cuts needed to make EVs enticing enough for most consumers to take the leap away from combustion engines.

Lamborghini, the favoured supercar of crypto bros, doesn’t have that problem. The Italian company’s Revuelto, starting price $600,000, is sold out through 2026. Most buyers hadn’t even seen the car before putting their name on the list, Chief Executive Officer Stephan Winkelmann said last year soon after the model was released.

In truth, the Revuelto isn’t a true EV. Instead, the niche unit of Volkswagen AG has paired the car’s electric motors with a V-12 combustion engine, so it’s best described as a plug-in hybrid. Still, the supercar’s release and immediate popularity indicates pent-up demand for electric vehicles among well-heeled aficionados. Whether they actually care about an EV’s broader purpose — energy efficiency and carbon neutrality — the top-end market’s embrace of the category signals electric motors have gained acceptance even among high-performance buyers.

Porsche AG is already ahead of the curve. The German automaker unveiled its all-electric Taycan series as a concept car back in 2015 and commenced production in 2019 before the Covid-19 pandemic brought the global car industry to a standstill. Now it’s one of the company’s fastest-growing models, with a 17 percent increase in deliveries last year to surpass 40,000 units.

Unlike Rolls-Royce and Lamborghini, Porsche has gone with a broad product strategy that makes it almost a mass-market brand. The more elite Taycan Turbo S starts at around $195,000, yet its entry-level Taycan is a little over $90,000. By comparison, Tesla’s Model S starts at $74,000, with the Model S Plaid selling for around $90,000. To be clear, one is a sports car and the other is a liftback sedan, but strong orders for expensive German engineering shows there is demand to be found in the EV market.

The best example of such hunger comes from Lotus. Now an arm of China’s Zhejiang Geely Holding Group Co, the British sportscar maker went big in 2019 when it unveiled the Lotus Evija, a limited production all-electric hypercar. Its acceleration of zero to 300 kilometers per hour (186 miles per hour) in 9.1 seconds puts it in a league with Formula One race cars. And the price isn’t far off either, at $2.3 million. Despite that sticker shock, or perhaps because of it, the Evija sold out the first year of production but suffered delays in delivery due to a shortage of parts.

Not every luxury brand is enjoying the boom. Lucid Group Inc., maker of the $250,000 Lucid Air Sapphire, in November cut its 2023 full-year production forecast by as much as 20 percent after revenue missed estimates for four straight quarters. The Newark, California-based startup had suffered early on from supply-chain shortages and surging prices of battery raw materials, and those speed bumps appear to have shaken confidence among consumers.

Still, for established brands with a strong track record, taking an electric leap and targeting those buyers willing to spend money appears to be the best path forward through the current EV winter. An added benefit may come from the same flow-on effects we’ve enjoyed from the gas-guzzling racing industry — technology developed for high-performance cars eventually flows through to mass-market vehicles, boosting power and making EVs more sustainable and affordable in the long-run.

Tim Culpan is a Bloomberg Opinion columnist. Views do not represent the stand of this publication.

Credit: Bloomberg