- Bloomberg NEF annually analyses and compares the cost of purchasing and producing EVs and internal combustion engine vehicles (ICEs).
- This year, the crossover point, i.e. the point at which EVs become cheaper than combustion-engine vehicles, is estimated to take place in 2022 for large vehicles in the EU.
- The largest cost in the production of EVs has historically been the battery, which accounted for 57% of total cost of a midsized US car in 2015. Bloomberg estimate this to fall to 20% by 2025, down from 33% in 2019.
- There are two other cost reductions in play which are comparatively benefiting EVs. Firstly, chassis and body costs will fall in contrast to combustion-engine vehicles and secondly, electric powertrain costs will fall due to the economics from large volume production of components.
Analysis & Comments
- While I agree (who cannot) with BNEF that at some point battery costs will fall far enough to make them cost comparable with traditional ICE’s, I think that the focus on just this aspect of the buying decision is misguided and somewhat simplistic.
- There are a lot of moving parts that drive a decision to buy an EV, not just cost. The situation in Europe is particularly complex, with subsidies, disposable income, city centre restrictions, taxes and cultural issues (environmental concerns), all playing their part. Recent analysis has suggested that when you take all of these into account, in some markets an EV VW is already cheaper than a petrol version – and it is all about tax!
- The other factor that gets ignored is charging infrastructure. Yes, at home charging will remain important (assuming consumers have access to some form of off-street parking) and slow speed AC chargers in work places and in street side lamp posts will all contribute.
- However, to make real progress we need a bigger (much bigger) network of fast DC chargers. The good news is that as EV demand grows, they are likely to become strong profit generators, encouraging operators of core infrastructure like motorway service areas to build them on a commercial, i.e. unsubsidised, basis.