Electric Vehicle Costs May Be On Par With Standard Vehicles By 2018

The costs of purchasing and running an electric vehicle may shrink to become even with the cost of running a standard internal combustion vehicle by as early as next year.

According to research conducted by Swiss investment bank UBS, an increase in consumer demand for electric vehicles could have a significant effect on the costs associated with them. The firm recently raised its estimates for EV market share by 50 percent to 14 percent by 2025 – equivalent to 14.2 million vehicles worldwide. It also raised its 2021 projection from 2.5 million cars annually to 3.1 million.

UBS also found that an EV powertrain is actually $4,600 cheaper to produce than it had initially calculated and that there is strong potential to further reduce costs as they become more popular. Once cost of ownership parity is achieved, which factors in both the purchasing price of a vehicle and running costs, this will attract more customers to hybrids and EVs and create “an inflection point for demand,” the UBS report said. If EVs and hybrids make up a large portion of the market share, cost reduction will become much easier.

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But while the cost of an electric car and an ICE car in Europe will be even by 2018, manufacturers will still be hard pressed to make money on them. What UBS refers to as a “true cost parity”, meaning manufacturers make at least a 5-percent profit margin on the vehicle, won’t be achieved by major automakers until 2023 at the earliest. Chevrolet currently loses an estimated $7,400 on every Bolt EV it sells and UBS projects it to make a 5-percent margin on the vehicle by 2025. The Tesla Model 3 is projected to lose $2,800 in its $35,000 base form, but will become profitable once equipped to cost $41,000 and over.

Once automakers do achieve true cost parity, EVs could mean big business. Their simpler design in relation to ICE vehicles has the potential to make them more profitable and easier to mass produce – though a major market shift such as that is still a long way out.

Forbes


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