Rising Trend: Electric Vehicles (EVs) edge closer to pricing equivalence with gasoline and diesel automobiles.
Electric Vehicles Approaching Cost Parity with Internal Combustion Engines
The cost of electric vehicles (EVs) is set to match or even surpass that of traditional internal combustion engine (ICE) vehicles in major markets for most classes of passenger vehicles, according to industry forecasts.
This significant development is primarily driven by the steady decline in battery prices. Giles Parkinson, the founder and editor of The Driven, Renew Economy, and One Step Off The Grid, has observed this trend firsthand, owning a Tesla Model 3.
Battery cell and pack prices have fallen dramatically over the years. In 2023, they stand at $US112/kWh, down from $US166/kWh in 2022 and a staggering $US806/kWh in 2013. This downward trend has resumed after a brief rise due to global energy price increases caused by Russia's invasion of Ukraine.
The 20% fall in battery prices over 2024 is expected to help achieve "price parity" on the sticker price of EVs. This means that by the mid-to-late 2020s, around 2028 to 2030, EVs are expected to reach sticker price parity with ICE vehicles in major markets for most passenger vehicle classes.
In fact, electric SUVs in Europe have already reached price parity with ICE vehicles. This trend is expected to continue, with one in four vehicles sold around the world predicted to have a plug by 2030.
The global head of strategy at BloombergNEF, Kobad Bhavnagri, has stated that this cost decline in batteries is crucial for electric vehicle economics. He forecasts that used EVs will reach parity with ICE vehicles by 2028, driven primarily by continued battery cost reductions aiming for around $100 per kWh by 2026.
However, challenges remain, including supply chain risks, infrastructure gaps, and consumer adoption hurdles. Policy support and technological advances are strongly driving the transition, and these issues are expected to be addressed over time.
In summary, major markets like the U.S. and Europe are on track to see pricing parity for most classes of passenger EVs around 2028 to 2030. New vehicles are already near this milestone, and used EVs are expected to follow suit as battery costs continue to fall rapidly.
[References] 1. U.S. Inflation Reduction Act's $7,500 new EV credit 2. Federal tax credits for EVs 3. BloombergNEF's report on EV cost parity 4. Edmunds and Recurrent Auto data on EV prices 5. EU's 2035 ban on new ICE sales
- The cost decline in batteries could potentially lead to electric sports cars becoming more affordable, making them a viable option for a wider array of consumers.
- As the prices of electric vehicles continue to drop, the barrier to entry for competitive sports leagues using electric-powered vehicles may decrease, potentially revolutionizing the world of sports.
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