Electric cars will have the same production cost as conventional cars with internal combustion engines, and the transfer from fossil fuel to electric vehicles may be imminent by 2024.
The additional cost of making battery-powered electric cars compared to their fossil fuel equivalents will drop to just $ 1,900 per unit produced by 2022 and disappear completely by 2024, according to research conducted by the investment bank UBS.
The research is based on a detailed analysis of the batteries from the seven largest manufacturers.
Achieving cost parity with the internal combustion engine (ICE) is seen as a key step in the world’s transition from burning fossil fuels.
Major automakers have been reluctant to shift production from their profitable models of internal combustion engines to electric cars because of expensive batteries, which are manufactured almost exclusively by East Asian companies such as LG Chem in South Korea, Panasonic in Japan and Chinese rival CATL.
Batteries for electric vehicles account for between a quarter and two-fifths of the cost of the entire vehicle.
The world’s transition to electric vehicles
UBS said it expects battery costs to fall below $ 100 per kilowatt-hour (kWh), a key milestone, by 2022.
The bank said those carmakers trying to cling to ICE sales risk being left behind by rivals such as Tesla and Volkswagen, the world’s largest automaker in volume, which has pledged to invest 33 billion euros in sales. of electric cars.
“There are not many reasons to buy an ICE car after 2025,” said Tim Bush, a UBS analyst.
He added that reducing battery costs would largely eliminate the financial situation of hybrid electric vehicles, which combine a battery with a conventional motor.
Battery-powered electric cars still command significant premiums over conventional counterparts, a key factor limiting the uptake of electric cars. A new Volkswagen Golf costs about £ 20,280, while the ID-3, its first electric vehicle on the market, will cost £ 29,990.
The UK’s largest carmaker, Jaguar Land Rover, lists its Jaguar I-Pace, its only all-electric vehicle, at £ 64,495, even after British government subsidies apply. It compares to a fossil fuel SUV counterpart, the Jaguar F-Pace, which it lists at £ 44,845.
The rapid reduction in battery costs is expected to trigger a faster transition to electric vehicles than previously expected. Sales of electric vehicles are already booming in the EU and China, despite the blow to the car market caused by the coronavirus pandemic.
Matthias Schmidt, an independent car analyst, predicted that one million electric and hybrid cars would be sold in 2020 in the EU out of a total market of 11 million.
Overall, UBS estimates an increase in electric car market share of up to 17% by 2025. By 2030, electric cars should account for 40% of global sales.
Dependence on East Asian battery manufacturers and growing demand have led Europe to take action late, with plans to subsidize several giant factories.
A start-up called Britishvolt has announced plans to build a gigafactory in the UK. However, government research suggests that up to eight facilities may be needed for the UK to replace the tens of thousands of jobs in the local automotive industry that depend on internal combustion engines.