More people buy petrol cars over electric cars because of their high price. However, that’s about to change. Electric cars are expected to cost the same to manufacture as conventional cars with internal combustion engines (ICE) by 2024. New research by the investment bank UBS shows an acceleration in the transition away from gas-powered vehicles may be coming soon.
The research, based on an analysis of batteries from the top seven manufacturers, shows that the extra cost of building electric cars versus fossil fuel vehicles will drop to only $1,900 (£1,470) per car by 2022 and completely vanish by 2024.
The largest automakers have hesitated to steer production away from their profitable ICE models towards electric cars because of costly batteries. These batteries are almost exclusively manufactured by east Asian companies such as Japan’s Panasonic, China’s CATL, and South Korea’s LG Chem. Batteries make up between a quarter and two-fifths of the overall vehicle price. UBS expects battery expenses to fall to less than $100 per kilowatt-hour (kWh) by 2022.
However, carmakers trying to hold on to ICE sales will be left behind by ambitious competitors like Tesla and Volkswagen, committed to investing almost $40 billion (€33B) in selling electric vehicles. “There are not many reasons left to buy an ICE car after 2025,” pointed out Tim Bush, an analyst at UBS.
The reduced battery costs are expected to trigger a quicker transition to electric vehicles than previously anticipated. It will also eliminate the financial problem for hybrid electric vehicles, which combine a conventional engine with a battery.
Despite the hit to the auto-market, electric vehicle sales are still thriving in China and the EU. According to UBS, electric cars’ global market share will likely reach 17% by 2025, and electric vehicles would account for 40% of global sales by 2030.
The rising demand and reliance on east Asian battery manufacturers have prompted Europe into action, with goals of supporting multiple Gigafactory’s. However, government-funded research advises that at least eight facilities would be required if the UK replaces the thousands of jobs in the local car industry dependent on ICE.
