Electric Vehicles (EVs) are approaching cost equivalence with gasoline and diesel automobiles, as depicted in today's chart.

Electric Vehicles (EVs) are approaching cost equivalence with gasoline and diesel automobiles, as depicted in today's chart.

Electric Vehicles Set to Match or Beat Internal Combustion Cars in Price

The world of automobiles is on the cusp of a significant shift, as electric vehicles (EVs) are expected to reach or surpass the sticker prices of their internal combustion engine (ICE) counterparts in most passenger vehicle classes within the next 1 to 3 years. This trend is driven by a combination of declining battery costs and manufacturing innovations.

At the Australian Clean Energy Summit earlier this week, Kobad Bhavnagri, the global head of strategy at BloombergNEF, emphasised the importance of the decrease in battery prices in enabling storage in the power system. Bhavnagri also highlighted that this decrease is crucial because it drives a tipping point in electric vehicle economics.

The cost of battery cells and packs for electric vehicles has fallen to $112/kWh in 2023, a 20% decrease from the battery price in 2022. This significant reduction in cost has been made possible by a resumption of the downward trend, after a brief rise caused by the global energy price increase following Russia's invasion of Ukraine.

Price parity, or the point when the sticker price of electric vehicles matches that of ICE cars, is expected to be achieved in most major markets for most classes of passenger vehicles. In Europe, large electric SUVs have already reached price parity, and small and medium EVs are predicted to follow suit within the next year. In the United States, large SUVs are expected to reach price parity, while small and medium EVs are expected to do so in China and Japan.

Giles Parkinson, the founder and editor of The Driven, and the editor and founder of Renew Economy and One Step Off The Grid web sites, also weighed in on the subject. Parkinson, who is a former business and deputy editor of the Australian Financial Review and owns a Tesla Model 3, noted that buyer incentives and tax credits have recently helped bring EV prices closer to parity. However, many of these incentives are expiring or changing, which may affect short-term affordability.

Market dynamics show mixed U.S. sales trends, with some declines driven by Tesla but growth from other automakers offering new models that presumably include more competitively priced EVs. In Europe, electrified vehicle sales are booming, with a 93% year-to-date increase, driven by expanding options and improving infrastructure, although price parity remains a challenge for mass adoption.

In summary, while some EV segments and premium models remain more expensive today, most major markets are projected to see EV sticker prices match or beat ICE vehicles within the next 1 to 3 years for most passenger vehicle classes, particularly as incentives phase out and manufacturers adopt cost-saving battery chemistries and scale production. Price parity is thus imminent but may depend on region, vehicle class, and how subsidy landscapes evolve.

The decline in battery prices, a key factor in the economics of electric vehicles, is also beneficial for the storage in the power system, aligning with the trend of electric vehicles becoming more affordable. This development in environmental-science and technology could potentially boost the industry, as finance becomes more feasible for the mass adoption of electric vehicles.

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