The current economic environment has made affordability one of the hottest topics in the automotive sector. Most headlines have focused on the pain felt by consumers, who between January 2021 and January 2022 saw new-vehicle prices increase 12.8% and used-vehicle prices jump 40.5%. Remarkably, manufacturers have borne an even greater burden. From March 2020 to May 2022, raw-material costs for ICE vehicles rose 106%, while EV costs skyrocketed 144% during the same period. While the supply chain issues are now slowly coming to an end and showrooms are filling with new models, interest rates have raced to more than 7 percent for new-car financing and more than 11 percent for used cars, bringing the average US car payment in Q3 to $700+, an unprecedented level.
