One of the most important milestones in the shift to electrification is coming sooner than you think. Electric cars will cost less to make than internal combustion cars by the year 2027, according to a report from The Guardian.
And the lower cost of production will come even sooner than that in certain EV segments. For example, electric midsize sedans and SUVs will be cheaper to make than internal combustion midsize sedans and SUVs by 2026, per the report. Just one year after that, smaller cars will follow and it’s mostly thanks to cheaper batteries.
The research that The Guardian cites concludes that batteries will drive a big decrease in EV production costs in the near future. As EV batteries get cheaper, the production of electric cars gets cheaper, too, because batteries account for as much as a quarter of that overall cost.
The Guardian cites a new study, which suggests that the price of batteries will decrease by more than half of where it is now, in this decade:
The new study, commissioned by Transport & Environment, a Brussels-based non-profit organisation that campaigns for cleaner transport in Europe, predicts new battery prices will fall by 58% between 2020 and 2030 to $58 per kilowatt hour.
This means that in as little as five years from today, electric cars will actually be the cheaper option for big auto and it’s very possible that, as The Guardian outlines, “tighter emissions regulations could put [EVs] in pole position to dominate all new car sales by the middle of the next decade...”
When you take the stricter emissions that the European Union is proposing, and you add that to the lower cost of batteries, you get a market where making and selling EVs is more lucrative for carmakers than ICE ever was.
The important question, then, is: Will cheaper to make translate to cheaper to buy? The report indicates that it is a possibility:
The current average pre-tax retail price of a medium-sized electric car is €33,300 [~$40,135], compared with €18,600 [~$22,615] for a petrol car, according to the research. In 2026, both are forecast to cost about €19,000 [~$23,101].
By 2030, the same electric car is forecast to cost €16,300 [~$19,818]before tax, while the petrol car would cost €19,900 [~24,196.]
Carmakers are beginning to like not operating on razor-thin margins. It’s possible that cheaper batteries will mean more profit for big auto, rather than EVs for the masses.
I can’t wait to see what carmakers are going to push in order to meet these upmarket margins as EV production costs go down. Really, I’m just stoked to see how they’ll swerve around the $25,000 electric car.