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Line of Tesla Model 3s in Florida. Photo by Zach Shahan | CleanTechnica.


Will Electric Cars Get Cheaper? Definitely!

Electric vehicles are reaching price parity with internal combustion engines, which is key in the world’s transition from burning fossil fuels.

The falling cost of producing batteries for electric vehicles, combined with dedicated production lines in carmakers’ plants, will make EVs cheaper to buy than gas-powered cars, on average, within the next 6 years. And that’s even without any government subsidies. A great study from BloombergNEF explains that the current average pre-tax retail price of a medium-sized electric car is €33,300 ($40,700) , compared with €18,600 ($22.800) for a petrol car, according to the research. In 2026, both are forecast to cost about €19,000 ($23,300).

Cost-competitive EVs in the short-term are inevitable, according to Logan Goldie-Scot, head of clean power at BNEF and one of the authors of the report. “We’re not talking about that crossover point being a decade away anymore,” he said. “For many vehicle segments, it’s in the next 3 or 4 years.”

What’s Needed to Fully Electrify Transportation?

What changes are in store so that 1.1 billion EVs can recharge and decarbonize the atmosphere by 2050?

EVs today are nearly at price parity with internal combustion engine (ICE) cars, and one reason for that leveling of the price playing field is advances in battery technology. Lithium-ion battery costs have declined approximately 90% over the last decade, so that most automakers have announced commitments to electrifying their fleets. That’s brought growing attention to batteries —  which still make up about a third of the cost of an electric cars — and the manufacturers which produce the batteries.

The average price per kilowatt-hour for a lithium-ion battery pack, according to a survey of nearly 150 buyers and sellers, has fallen to $137, down 13% from $157 in 2019. A decade ago, these batteries sold for more than $1,100 per kilowatt-hour. The threshold for price parity with gasoline engines, according to BloombergNEF, is around $100/kWh. In the report, BNEF analysts said they expect battery makers to hit $101/kWh in 2023. For the first time, the survey found some prices reported at the cost-competitive level, with batteries for e-buses in China selling at $100/kWh.

Battery capacity increased 13-fold over the last 5 years until 2020 and is expected to quadruple in the next decade to over 3,000 gigawatt hours of battery capacity. That’s enough to manufacture at least 50 million electric vehicles, about 50% of total car sales. Increased battery capacity is an essential element of the overall electrification of transportation picture and a resulting cheaper EV fleet from which to choose.

Tesla that has a strong relationship with Panasonic in the US and CATL and LG Chem in China. The world’s largest EV maker pays an estimated average of $115 per kilowatt-hour for batteries, down from $128 last year. At this price, the 80.5 kWh battery pack in Tesla’s long range Model Y would cost the automaker about $9,250.

In the US, the ambitious infrastructure plan put in place by the Biden administration also promises to accelerate the transition to electric vehicles, which, in turn, is fueling the interest of automotive companies to have more electric vehicles in their range.

Several recent commitments from original equipment manufacturers (OEMs) around electrification are pointing more people in the direction of zero emissions transportation. GM has announced they will offer 30 new electric vehicles globally by 2025. Ford committed $29 billion to electric vehicles and autonomous vehicles. BMWJaguarHonda, and Volkswagen have also made significant commitments to EVs. Toyota says it will release 15 fully electric vehicles by 2025.

Clean Energy for America Bill Reexamines EV Tax Credits

The “Clean Energy for America” bill would eliminate the existing and stifling EV cap: $7,500 with no maximum price but a phase-out for individual automakers once they hit 200,000 total EVs sold. Tesla and GM have hit that limit, so no EV sales from these 2 manufacturers are currently eligible for the tax credit. Eliminating those barriers will make EVs seem much cheaper to the average US car consumer.

The recent announcement that the EV tax credit has been revised is really good news. The US Senate Finance Committee advanced legislation in May that would boost EV tax credits to as much as $12,500 for EVs that are assembled by union workers in the US. The bill would limit tax credits to vehicles with a retail price below $80,000 to qualify for the tax credits.

The new version of the credit would phase out over 3 years once 50% of US passenger vehicle sales were EVs. The US Senate Committee on Finance says the bill:

“… replaces the old rules with a free-market, technology-neutral system in which reducing carbon emissions becomes the lodestar of America’s energy future… Instead of the 44 tax breaks from yesteryear, the new system will incentivize three goals: clean energy, clean transportation and energy efficiency.”

Final Thoughts About Cheaper EVs

Of course, the chip crisis is strongly affecting the automotive industry in general and the EV sector in particular and will most likely extend until 2022. It will create production problems for the near future.

But, as cheaper EVs assume global proportions, momentum will be hard-driven by the European and Chinese markets, which are expected to represent 72% of all passenger EV sales in 2030. By 2030, China and Europe are expected to achieve the feat of 50% of all cars on the road being EVs. This will be supported by policy measures that will emerge from European vehicle CO2 regulations and China’s EV credit system, including fuel economy regulations and city policies that are intended to restrict new internal combustion vehicle sales.

In the US, nearly 60% of households have 2 or more cars, and many have the ability to install home charging. Around the world, governments and automakers are focused on selling newer, cleaner electric vehicles as a key solution to climate change. With 550 EV models predicted to be available from global auto manufacturers by 2022, interest in EVs will rise exponentially. A Massachusetts Institute of Technology study has definitively stated: “Electric vehicles are better for the climate than gas-powered cars…[and already] electric cars may actually save drivers money in the long run.”

With the impacts of the climate crisis becoming more evident every year and clear science on the health harms of air pollution, it’s imperative that we switch from gasoline to electric vehicles as soon as possible. Reduced cost is seen as critical to make electric vehicles more attractive to consumers, especially when combined with increased range – the distance a vehicle can travel before it requires charging.

With lots of activity swirling around to improve charging networks, the final pieces are falling into place to create cheaper EV costs, making the switch to all-electric transportation much easier for consumers.

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Carolyn Fortuna (they, them), Ph.D., is a writer, researcher, and educator with a lifelong dedication to ecojustice. Carolyn has won awards from the Anti-Defamation League, The International Literacy Association, and The Leavy Foundation. Carolyn is a small-time investor in Tesla. Please follow Carolyn on Twitter and Facebook.


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