Automotive August 2021

EVs to be
cheaper to
produce than
fossil fuel
vehicles by 2027
Electric vehicles (EVs) will be cheaper to
produce compared to fossil fuel-powered
vehicles by 2027, according to a study
published.
A drop in the cost of making batteries will
make EVs cheaper to buy, while stricter
emissions regulations could enable them to
take a sizeable chunk of the market share
within the next decade.
The manufacturing costs of larger vehicles
such as electric sedans and SUVs will be as
cheap as that of gasoline and diesel models
by 2027, with small cars reaching the
threshold the following year, according to
a study by Bloomberg New Energy Finance
(BloombergNEF).
Electric vehicles reaching price parity
with the internal combustion engine is a
significant step in the worldwide transition
away from conventional burning fossil
fuels. The decreasing production costs of
batteries and dedicated production lines
in carmakers’ plants will make electric
vehicles cheaper to buy than conventional
cars within the next six years, even before
any government subsidies, BloombergNEF
found.On average, the current pre-tax
retail price of a medium-sized electric car
is 33,300 euros ($40,133.94) compared
to 18,600 euros for a gasoline car, while
both are expected to cost about 19,000
euros in 2026.By 2030, an electric vehicle
is estimated to cost 16,300 euros before
tax, while a gasoline car would cost 19,900
euros. Forecasters are in agreement that
the cost of new batteries will continue to
fall in the coming years.
New battery prices will decrease by
58% throughout this decade to $58 per
kilowatt-hour, the Transport&Environment
organization suggests.
A reduction in battery costs to below $100
per kWh is viewed as a key milestone
towards the greater proliferation of electric
vehicles while it would also mitigate the
financial appeal of hybrid models, which
combine a battery with a conventional
engine.
Despite the coronavirus pandemic, electric
vehicle sales boomed in 2020, the first
year in which European consumers bought
more than half a million electric cars, and
the global sales in the first quarter of 2021
were 2.5 times higher year-on-year.
Germany is by far the biggest single
market for battery-electric cars in Europe,
with 64,700 sold in the first quarter.
That performance was helped in part
by generous subsidies to help its auto
industry. Norway in 2020 was the first
country in the world where more electric
cars were sold than fossil fuel cars, thanks
to generous subsidies.
The United Kingdom became the second
largest electric vehicle market in the first
quarter of 2021, surpassing France. Battery
electric comprised 7.5% of U.K. sales in the
first three months of 2021, almost doubling
the market share compared with the same
period in 2020.
While new emissions rules partially
enabled the rise in sales, environmental
campaigners are calling on governments to
introduce tougher regulations.
The U.K. government plans to ban the sale
of new fossil fuel vehicles from 2030, while
European companies have called on the
EU to set 2035 as the end date for selling
combustion engines.
The relatively higher previous price of
electric cars was one of the main reasons
preventing more people from buying them.
However, reduced cost is seen as critical to
make them more attractive to consumers.
Increased range and charging infrastructure
would also bolster a higher demand, as is
the case in Norway.
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