One of the main reasons which limit the mass adaption of electric cars or EVs is its price difference in comparison with its IC engine counterpart. At present, an electric vehicle costs 30% more than an IC engine-powered vehicle with similar specifications. A study conducted by BloombergNEF forecasts that Electric vehicles will be cheaper than gasoline-powered vehicles in Europe.
In this article, we will be discussing the factors contributing to the price reduction of electric vehicles as mentioned in the study conducted by BloombergNEF along with a few general aspects on the topic.
Currently, Electric vehicles are expensive because,
- The Li-ion batteries which power the electric vehicles are costlier.
- Researches for efficient and more economic manufacturing methods are still going on.
- Auto giants were reluctant to shift their focus from gasoline cars to electric cars.
- Reluctance from the car makers resulted in sluggish growth of EV-related technologies.
Rays of Hope
By 2027, electric cars and vans would be cheaper to manufacture than traditional, fossil-fuel-powered vehicles, according to analysis, and stricter pollution controls could place them in pole position to overtake all new car sales by the middle of the decade. According to BloombergNEF estimates, larger vehicles such as hybrid sedans and SUVs would be as inexpensive to manufacture as petrol and diesel models by 2026, with compact cars crossing the threshold the following year.
The price parity of electric cars and internal combustion engines is seen as a significant achievement in the world’s transformation away from fossil fuels.
The Reduction in Battery cost
Around 2020 and 2030, new battery costs are expected to drop by 58 %, to $58 per kilowatt-hour. A reduction in battery prices to under $100 per kWh is seen as a critical step toward greater adoption of fully electric vehicles, which will effectively eliminate the financial appeal of hybrid electric vehicles, which pair a battery with a traditional engine.
Along with the advancements in battery technology and more cost-effective production methods the development of lithium reserves around the world will also result in the reduction of battery cost.
All forecasters agree that the cost of the battery would come down because,
- There are several promising kinds of research are going on an academic as well as industrial level.
- Companies are investing hugely in the development of better manufacturing methods.
- Countries all around the world have identified the need for minerals to drive the EV revolution.
- The Bolivian government has taken strong decision to develop their Lithium reserves to their fullest potential.
- All major countries like America, India, China etc are actively looking for mineral reserves to aid in the electric revolution.
Dedicated Manufacturing Plants and Methods
It was the introduction of the production line that led to the massive success of Model-T. The Model-T was produced with the help of a dedicated production line, the car became more affordable to the commoners and received wide acceptance from every stratum of the society. A dedicated production line will increase the rate of production hugely by saving a lot of energy and time. The skill level required to the operators working on a production line is comparatively low hence the pay range which will affect the price of the product as well.
A dedicated production line is a must if you want to produce things economically because,
- Product-oriented plant layout will result in saving time and energy.
- The practice will help companies to employ semi-skilled labours and reducing the payment.
- Dedicated manufacturing plants will facilitate the optimum use of resources.
- Training and appraisal of employees will be much easier and effective.
- EV specific manufacturing machines and methods are being developed thus reducing the price of the car.
The study conducted by BloombergNEF is specific to Europe where the CO2 regulations are and going to very stringent. The European carmakers are forced to make the shift due to the heavy penalties they might suffer if they don’t make the transition.
Though the study is conducted mainly for Europe, the factors we discussed are prevalent around the globe.
Now let us look into few things that would make the cost of owning an EV much cheaper than that of an IC engine vehicle.
Of course, the first thing would be the government regulations which will have an impact on the initial and running cost of an EV. Governments around the world have made it very clear that they are looking for an EV revolution in their country.
The incentives and tax reduction for EVs and the penalties and increase in tax for the gasoline-powered vehicles will certainly a tiebreaker. A rise in oil price and tax on crude products also might play a significant role in countries without oil reserves.
The Indian government has made a policy a few months back which will permit the registration of electric vehicles without battery. The battery costs one-third of the total price of an electric vehicle. This will reduce the initial cost of an Electric vehicle to a great extent. Battery swapping is also is a promising approach that way owning an electric vehicle will be much cheaper.
Gradually this approach is being welcomed by other countries as well.
The cost of an electric vehicle will certainly come down over the years. Now that automakers around the world have shifted their focus from gasoline-powered cars to electric cars, the cost reduction is just a matter of time.
Until recent years electric cars were considered to be boring and impractical for long-distance purposes but the bold move from Tesla changed the way we look at electric cars. Currently, the auto giants are following the path defined by Tesla. This same theory can be applied to cost reduction as well. If one player could reduce the price of an EV the rest will follow the path and make it a reality not just in Europe or China but around the entire globe.