Electric Car Price Tag Shrinks Along With Battery Cost

Choosing an electric car over its combustion-engine equivalent will soon be just a matter of taste, not a matter of cost.

Every year, BloombergNEF’s advanced transport team builds a bottom-up analysis of the cost of purchasing an electric vehicle and compares it to the cost of a combustion-engine vehicle of the same size. The crossover point — when electric vehicles become cheaper than their combustion-engine equivalents — will be a crucial moment for the EV market. All things being equal, upfront price parity makes a buyer’s decision to buy an EV a matter of taste, style or preference — but not, for much longer, a matter of cost.

Every year, that crossover point gets closer. In 2017, a BloombergNEF analysis forecast that the crossover point was in 2026, nine years out. In 2018, the crossover point was in 2024 — six years (or, as I described it then, two lease cycles) out.

Analysts have for several years been using a sort of shorthand for describing an electric vehicle battery: half the car’s total cost. That figure, and that shorthand, has changed in just a few years. For a midsize U.S. car in 2015, the battery made up more than 57 percent of the total cost. This year, it’s 33 percent. By 2025, the battery will be only 20 percent of total vehicle cost.

The Incredible Shrinking Car Battery

EV battery cost for U.S. medium-size car as a percentage of retail price

                          Source: BloombergNEF

Note: Includes profit margins and costs other than direct manufacturing costs.

My colleague Nikolas Soulopoulos, author of the research note, provided further insights. The first is that he expects electric vehicle chassis and body costs to drop slightly, while those same costs will rise modestly for combustion vehicles “as a result of light-weighting and other measures to help comply with emissions targets.”

Source: bloomberg