Will the production costs between electric cars and petrol cars meet soon?
There is lot of debate right now on the manufacturing cost of a battery powered vehicle (electric vehicle) as the cost of batteries are still rather high whilst the cost of manufacturing a petrol or even diesel powered vehicle remains relatively lower. This is also because the sales of petrol powered cars are still much better and so economies of scale help in the overall cost.
Meanwhile, nobody is taking steps to highlight the cost of mining for minerals to build EV batteries and the third world cost in terms of pollution to ready these clean air vehicles that will be used mainly in countries like Norway, England, France and of course America where the environmental impact of this is not being measured.
Meanwhile a new study has emerged (again not taking into account the cost to nations where the minerals are being mined) to say that battery-electric vehicles (BEVs) will achieve a price parity with their fossil-fuel counterparts across Europe from 2027 onwards at the latest. This is according to the results of a new BloombergNEF study commissioned by the clean-transport campaign group Transport and Environment (T&E).
Electrically-chargeable vehicle (EV) adoption is increasing with help from incentive programmes and expanding model offerings. In the first quarter of this year, BEVs accounted for 5.7 percent of EU new-car registrations, an increase of 59.1 percent compared to the first three months of 2020.
Plug-in hybrids (PHEVs) took 8.2 percent of the market, equating to an increase of 175 percent. Meanwhile, diesel and petrol-powered cars continued to see falling volumes.
However, the automotive industry is still in the early stages of electrification. Presently, those investing in EVs have both the confidence and capital to invest in electric drivetrains. As components, particularly batteries, become cheaper and more technologically advanced, EV price tags should shrink.
Price parity
The segment will dictate a BEV’s point of price parity with petrol in the coming years, with larger vehicles becoming more affordable more quickly. According to the BloombergNEF study, light vans will lead the charge, becoming cheaper than their ICE counterparts in 2025. BEVs in the C and D segments will follow in 2026, while small cars (B segment) bring up the rear in 2027.
Building better batteries
So, what will be the driving force behind shrinking costs? The BloombergNEF study points to falling battery costs, new vehicle architectures and dedicated production lines as leading factors in reducing price, even before subsidies come into the equation. ‘An optimal vehicle design, produced in high volumes, can be more than a third cheaper by 2025 compared to now,’ the study states.
Batteries in particular have had an important role to play as they have consistently been the most expensive EV component over the past decade. In the US, they currently account for roughly 30 percent of an EV’s cost. In Europe, prices are more widely spread, raising the continent’s average battery price above the global average, resulting partly from some lower-volume orders. But as battery prices fall and more optimized platforms are developed, EV prices should follow. There is also the issue of EV battery safety issues to consider.
‘New chemistries, better manufacturing methods, innovative cell and pack-design concepts and other factors contribute to average prices per kilowatt-hour declining by 58 percent from 2020 to 2030,’ BloombergNEF points out. Past this point, new technologies like the solid-state battery will continue to drive down price. These smaller, more powerful units are seeing an uptick in interest from OEMs. Most recently, BMW and Ford led an investment round in Solid Power, a producer of solid-state batteries and Toyota is already working to get a solid state battery powered EV in showrooms before Christmas this year.
