Electric cars will be cheaper to produce than fossil fuel vehicles in a few years

By 2026, larger vehicles such as SUVs will be as cheap to produce as petrol and diesel models, according to forecasts from BloombergNEF, with small cars reaching the threshold the following year.

Electric cars ‘will be cheaper to produce than fossil fuel vehicles by 2027’ – Guardian – May 2021

The biggest single cost of Electric cars is the battery, however batteries continue to reduce in price as the numbers produced increase. As investment in Research and Development accelerates the prices will decrease. It’s anticipated by researchers that new EV battery chemistries are being adopted faster than in the past.

Parity drifting

Predictions of price parity between Electric and Petrol / Diesel cars are drifting further into the future. Bloomberg’s Electric Vehicle Outlook 2020 predicted parity for large cars in Europe would be in 2022. In October UBS predicted 2024 and now Bloomberg says 2026.

Electric cars cheaper due to reducing battery and productions costs

Wright’s Law said that “For every doubling of Airplane production the Labour requirement reduced by 10 -15%”. Livewire / ARK Invest believe that this applies to Electric cars, as well as Internal Combustion Engine (ICE) cars. However, they calculate that the cost of manufacturing Electric cars is reducing 12% per annum compared to 0.5″ for ICE, the calculation is based on cumulative production. Consequently, as with Bloomberg above, anticipate that Electric cars will cost the same as ICE in 2022 and subsequently will continue to get cheaper.

See Livewire’s video on the economics of Tesla, but the principles apply to all Electric car manufacturing.


The largest individual cost in an Electric car is the Battery

Greater investment in Batteries for EV is increasing the energy they can store and reducing the cost and weight.

Lithium-ion battery pack prices fell 87% from 2010 to 2019, with 13% in 2019. Underlying material prices will play a larger role in the future, but the introduction of new chemistries, new manufacturing techniques and simplified pack designs will keep prices falling.

The falling cost of producing batteries for electric vehicles, combined with dedicated production lines in carmarkers’ plants, will make them cheaper to buy, on average, within the next six years than conventional cars, even before any government subsidies, BloombergNEF found.

Electric cars ‘will be cheaper to produce than fossil fuel vehicles by 2027’ – Guardian – May 2021

Tim Bush, a UBS analyst, said that the reduction in battery costs would also largely eliminate the financial case for hybrid electric vehicles, which combine a battery with a conventional engine.

Electric cars ‘as cheap to manufacture’ as regular models by 2024 – Guardian – October 2020

A 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.

Electric cars ‘will be cheaper to produce than fossil fuel vehicles by 2027’ – Guardian – May 2021

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