US Lagging Behind China in Affordable EV Production

New data indicates a notable price disparity between electric vehicles (EVs) in the U.S. and China. While China sees EVs costing slightly less than traditional internal combustion engine (ICE) vehicles, american consumers face a considerable premium for going electric.

According to new data from JATO dynamics, an automotive data analytics firm, the average EV in the U.S. carries a roughly $14,000 premium.

Dan Sperling, founding director of the UC Davis Institute of Transportation Studies, told Fortune he thought the $14,000 figure was overestimated – but conceded that there was a strong, real gap.

Sperling attributes China’s EV affordability to intense competition among provinces, lower labor and battery costs due to domestic supply chains, and less reliance on subsidies. He notes that the “frenzy of competition” is a key factor.

China’s EV Market Success

JATO reports that the average price of a Chinese internal combustion engine is €22,500 (approximately $26,205), whereas a battery electric vehicle costs 3% less, or €21,900 ( $25,509) on average.This contrasts sharply with the situation five years ago when EVs cost 10% more than gasoline vehicles.

“There’s a long history showing that absolute protectionism undermines an industry rather than supports it,”

BYD, a leading Chinese automaker, exemplifies this success.BYD sold more than 4 million cars last year-10 times what it sold in 2020-and now dominates roads across the world, from Bogotá to Budapest. In Europe, its compact Dolphin model retails for under €20,000 ($23,200), roughly half the price of Tesla’s Model 3.

Analysts suggest that BYD’s rapid innovation, control over its battery supply chain, and willingness to accept lower short-term profits are overwhelming established automakers. Critics also argue that Chinese goverment policies are contributing to overproduction and the flooding of export markets with inexpensive EVs.

Sperling cautions that the U.S.’s focus on tariffs may hinder the advancement of its own EV industry. He argues that “Tariffs of more than 100% have kept Chinese cars out of the American market, a protection that may buy time, but also risks making U.S. automakers complacent.”

He added, “There’s a long history showing that absolute protectionism undermines an industry rather than supports it.”

sperling believes that the absence of direct competition reduces the incentive for the big Three automakers – GM,Ford and Stellantis – to aggressively innovate in the EV sector.

While the U.S. has made strides in EV affordability compared to gasoline cars, the gap remains significant. In 2019, gas cars were 44% cheaper than electric cars, and in 2024 the gap narrowed to 31%.

Sperling emphasizes that the U.S. lacks the structural policies, such as tax credits, purchase mandates, and subsidies, needed to incentivize automakers to produce EVs at scale.

The Big Three’s EV Challenges

Despite ongoing efforts, major automakers are facing challenges in their EV transitions, with substantial losses accumulating.

ford recently announced a $5 billion EV initiative,planning to reconfigure its kentucky plant to produce a $30,000 electric pickup by 2027. However, analysts caution that this could either be a transformative move or a further drain on the company’s finances, as Ford’s EV division has already incurred over $12 billion in losses since early 2023.

GM also announced a $4 billion investment in domestic manufacturing, including its EV operations. In the last quarter of 2024,GM’s electric portfolio became “value profit positive,” indicating that revenue from each EV sale covers the direct production costs. However, this does not include fixed costs like labor and plant expenses.

While GM holds the second-largest EV portfolio in the U.S. market after Tesla, James Picariello, senior automotive research analyst at BNP Paribas Exane, estimates that GM lost approximately $2.5 billion on the 189,000 EVs it built and sold to dealerships last year.

GM has stated its intention to achieve $2 billion in savings improvements for its EV business.

Stellantis has also faced difficulties in its EV transition, posting a €2.3 billion net loss in the first half of 2025 as operating margins shrank to just 0.7%. The automaker has struggled to spark U.S. demand, slashing prices on electric models like the Jeep Wagoneer S to move inventory.

Tariffs and weak demand have led Stellantis to extend furloughs at its Termoli site in Italy.Despite these challenges, the company is moving forward, having unveiled the STLA Frame platform, which supports gas, hybrid, EV, and hydrogen drivetrains. Stellantis has also partnered with China’s Leapmotor, investing €1.5 billion for a 21% stake, aiming to combine its brand recognition with Leapmotor’s innovation to produce more affordable EVs.

Policy Shortcomings

Industry experts attribute the price gap to the U.S.’s failure to implement effective policies promoting electric vehicles. president donald Trump’s Big, Beautiful Bill act ended tax credits for new, used and leased EVs.

Sperling suggests that the U.S. should consider encouraging joint venture investments, similar to China’s approach of requiring foreign automakers to partner with domestic companies, to accelerate the development of EV technology and expertise. He stated, “You create a whole cadre of technicians and engineers and workers that are adept with the technology,” adding, “Detroit is badly lacking that.”

He rejected the idea that Detroit is doomed, but stressed it depends entirely on policy.In his view, legacy U.S. automakers are currently coasting on SUVs and pickups, without making the investments in EVs or software that Chinese rivals have already mastered.

“If the U.S. continues to keep out the Chinese and discourages electric vehicles, it will take decades to catch up,” Sterling said. “But if policies change, yes, it can catch up for sure.”