When will EVs cost the same as petrol and diesel cars?

Tuesday, 13 June 2023

Eventually, electric and combustion vehicles will cost the same, but we’re still a few years away.

A big goalpost for the electric transition is price parity, or when electric vehicles will cost the same as their combustion counterparts. But when can we realistically expect that to happen?

Within the next decade is the general view. Some experts suggest that it could happen as early as 2025 for certain segments of the market, while others believe it may take until the mid-2030s for broader market adoption. However, it's important to note that these are projections, and the actual timeline may be subject to change based on various factors.

The battery is the single most expensive part of an electric vehicle, which is why it’s the main focus for reducing costs.

A report from BloombergNEF (BNEF) in 2021 said that increased supply and demand of EVs should help drop prices as they become more mainstream and less niche, as will cheaper and better batteries, while tighter emissions regulations around the world will push combustion-powered vehicles into more expensive territory.

The big benchmark is the cost per kilowatt hour (kWh) of batteries, the largest single cost in an EV. We’ve seen advancements like lithium iron phosphate cells, which offer a longer life cycle thanks to low degeneration, more charge/discharge cycles, are more cost-effective and don’t contain harmful heavy metals such as cobalt or nickel, but we need more to really drop prices.

Australia climate minister Chris Bowen says Australia is capable of more production of electric vehicle components, while wanting New Zealand to be on the same page when it comes to supply chains.

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Battery capacity in electric vehicles is measured in kWh, and bringing that figure to below the US$100/kWh mark is what every manufacturer is aiming for.

According to BNEF, the research found that, given current consumer preferences for higher ranges, a figure closer to US$80/kWh is more likely to see parity in major markets like the USA and Europe, while US$60/kWh is likely to be when EVs will become cheaper than combustion vehicles in all segments and countries.

BNEF expects battery prices to reach US$80/kWh in 2026 and US$60/kWh in 2029, down from US$137/kWh in 2020.

Meanwhile, Ford’s CEO, Jim Farley, said at a recent investor conference that EVs may not hit parity until after 2030.

Between 2030 and 2035, Farley told Reuters, much of the industry's EV cost savings will come from 'dramatically lower labor content' because the vehicles will be easier to build with fewer parts, and will be fitted with smaller batteries that use cheaper materials.

Farley has also gone on record in saying he doesn’t think cramming bigger batteries into vehicles is the right approach, particularly when it comes to environmental effects. Of course EVs are cleaner to run than combustion cars, but mining and building those big batteries is harder on the planet than manufacturing engines. Not to mention the part after the EV dies, but that’s a separate discussion.

Feebate schemes like our Clean Car Discount certainly help EV uptake, with almost 11% of new car sales being electric in 2022. By 2030, the Climate Change Commission estimates a huge 67% of vehicles coming into New Zealand will be electric. With any luck, we’ll also have equally priced electric alternatives in evey segment by then as well.