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9 Reasons Why Tesla Cars Are So Expensive

Tesla has become one of the leading names not just in the electric car industry but in the entire automotive industry.

It is a name on the tip of many people’s tongues, and its popularity is rapidly growing. But you might be wondering why Teslas are so expensive. Let’s take a look.

Here are 9 reasons why Tesla cars are so expensive.

1. It Is A Well-Known Brand

When you think about electric vehicles, the chances are that Tesla will be one of the first companies that pop into your mind.

This is because they have come to epitomize electric vehicles and are known to be excellent cars, especially if you want an electric vehicle.

This is likely due to their pioneering of the electric vehicle market and that they solely make electric vehicles, unlike most other manufacturers who still predominantly sell cars with internal combustion engines.

Furthermore, Tesla’s CEO (amongst other things) helps put Tesla on the map, as he is famous in his own right.

All of this comes at a cost. You’re paying for a guarantee that you are buying a good car but also that you are buying one of the top electric vehicles you can find.

Also, as electric vehicles go, the top-of-the-range Teslas can be considered status symbols to a certain extent (not to the extent of something like a Ferrari, of course).

2. There’s A Price For Luxury

Tesla is a luxury car brand, and the top-of-the-range Teslas come with all the bells and whistles you want in a car.

For example, the Tesla Model S comes equipped with a 17-inch touchscreen that offers 2200 x 1300 resolution and can tilt both left and right. You can watch movies and play games on it, including driving games that you can control with the car’s steering wheel.

The 17-inch screen includes wireless headphones and controller technology, allowing anyone from any seat in the car to game on it. The system is on-par with the newest consoles, making it an easy and pleasurable experience.

As if that wasn’t enough, the second row of the Model S is perfectly optimized for passengers. It has ample legroom (and leather seats, of course), a foldaway armrest equipped with wireless charging capabilities, and storage space.

There is also a tiny screen sandwiched between the two front seats that can be accessed by the passengers at the back.

All these classy features do, of course, come at a cost. Installing state-of-the-art console gaming technology and touchscreens in a car doesn’t come cheap and only further increases the price.

3. Advanced Battery Technology

The unfortunate reality is that batteries used to power electric vehicles are still more expensive to make than traditional internal combustion engines. While they have become much cheaper than they used to, they don’t come cheap.

One of the reasons for the high production cost is the cathode in batteries, which is one of the electrodes that stores and releases electricity. Cathodes require materials such as cobalt, nickel, manganese, and lithium to manufacture.

These minerals need to be mined and processed, and some are also in short supply worldwide. All of this means that the most essential part of electric vehicles is one of the most expensive components of the entire vehicle.

Furthermore, most research and development on electric car batteries has focused on increasing their range rather than making them cheaper to produce. Even though prices have dropped, it still costs around $6300 for the average battery in an electric vehicle.

4. High Production Costs

Tesla is currently not producing as many cars as they want to. While there are plans in place to build a new and bigger factory, the current reality is that they aren’t manufacturing as many cars as they should.

This only pushes the price up, as the more you produce, the more you save, as your cost per unit goes down. The inverse is also true. The less you make, the less you save as your cost per unit increases.

5. Teslas Are In High Demand

One of the most basic economic principles is that of supply and demand. When demand exceeds supply, you can charge high prices, as many people are willing to pay.

That is the case with Tesla, as they currently cannot manufacture enough vehicles to supply the demands of consumers.

As a result, they can charge a high price, as they know they’ll always be in demand. This, of course, pushes up the price of Teslas even more.

6. Tax Credit Threshold

The United States government has introduced tax credits in an attempt to encourage people to purchase electric vehicles. However, there are several caveats regarding qualifying for this incentive.

These include the need for the vehicles to cost less than $55000 for sedans and $80000 for SUVs, trucks, and vans. Furthermore, the batteries and their components need to come from North America.

Therefore, not all Teslas enable you to qualify for the tax credit, and those that do have to follow strict regulations. These regulations can potentially be more costly, pushing the manufacturing price up.

7. Safety Features

Teslas are some of the safest cars in the world. The Tesla Model X, Model S, and Model 3 achieved the lowest probability of injury out of any vehicle that has ever been tested by the United States Government’s New Car Assessment Programme.

This is due to the large, fortified structure that contains the batter. This structure gives the car a low center of gravity and large crumple zones.

Furthermore, the batteries themselves are very safe. They are extremely strong and well-protected, so the batteries themselves are rarely damaged in an accident.

In the very unlikely event that one of the batteries catches fire, the battery packs are designed so that the fire is isolated to particular areas of the battery.

The heat produced by the flames is also vented away from the cabin to ensure that the passengers have the best chance of survival.

In the table below are some statistics comparing Teslas safety stats with US averages.

All these safety features come at a cost. The safer you want a car to be, the more expensive it will be to the manufacturer. Therefore, the advanced safety features in Teslas only serve to make cars more expensive. 

8. Advanced Software

Teslas are not like any ordinary car. They come equipped with a host of advanced technology, most notably its autopilot system.

The autopilot system offers a variety of capabilities, which amounts to SAE (Society of Automotive Engineers) International Level Two vehicle automation.

The Tesla Autopilot features are:

  • Traffic-aware cruise control.
  • Lane centering.
  • Automatic lane changes.
  • Self-parking.
  • Semi-autonomous navigation on freeways.
  • Ability to summon the car 

A system like this is expensive to develop, as it has to work consistently; otherwise, the vehicle operator could be placed in a dangerous situation.

Therefore, a lot of time, money, and effort is poured into developing the autopilot technology.

Tesla is currently working on (and has been working on) using artificial intelligence to train its autopilot system using real-world scenarios to ensure that it is constantly improving.

9. Teslas Have Long Driving Ranges

No, I’m not talking about golf, although if Teslas came equipped with a driving range, that might explain why they’ll set you back so much. I’m referring to how a car can drive with a single charge until it runs out of battery.

Teslas rank very high in this category. In Car Magazine’s article on the best electric vehicles with the longest range in 2022, there are three Teslas in their top 10. In the table below, you can see where each model ranked and what their range is.

Model NameRankingRange
Tesla Model X8348 miles (560 km)
Tesla Model 3 Long Range7360 miles (579 km)
Tesla Model S2405 miles (652 km)

The range of electric vehicles is significant, as recharging them is not a quick process like refueling a regular car is.

Therefore, the longer they can drive and the more efficient they are, the more you will likely end up paying for them.

The driving range mainly depends on the batteries (and car weight), and because batteries are expensive, so is increased range.