When companies talk about the implementation of electric cars and the electrification of their fleet, one of the questions that often arises is related to the cost of these electric vehicles. Often the statement is that electric cars are more expensive than combustion cars.
Let’s find out whether an electric car is indeed more expensive or whether you should wait to implement the electrification of your fleet into your mobility strategy.
Current price difference and future outlook
Currently, battery electric vehicles (BEV) are still more expensive than their conventional diesel or petrol counterparts. When looking purely at purchase prices - without VAT as this can vary locally depending on legislation - a 100% electric vehicle is still 15 to 25 % more expensive, depending on the model. The difference is mainly caused by the extra production cost of the battery pack. On the one hand because it uses rare - and thus expensive - metals that are not yet being sourced on the same industrial level as recourses for conventional vehicles with internal combustion engines (ICE). On the other hand the higher production cost is caused by a lack of economies of scale. EV manufacturing is still in its first phases, hence economies of scale are not nearly enough being exploited to lower manufacturing cost.
Recent estimations by Transport & Environment and Bloomberg predict that - mainly because of applied economies of scale - the manufacturing cost of battery electric vehicles will reach that of an equivalent conventional diesel/petrol car somewhere between 2025 and 2027.
Furthermore, as the focus of automotive manufacturers is shifting more towards electric vehicles and more away from conventional drivetrains, the manufacturing economies of scale for diesel/petrol cars will go down. The new EURO7 norm is to be introduced in 2025, which adds the need for more sophisticated technology in cars with combustion engines. This will raise manufacturing cost and thus purchase prices of cars with a combustion engine.
Is the EV cheaper than ICE?
Will an electric car only be cheaper in the future or is it already so today? To provide an answer, a quick calculation needs to be made, taking into account all relevant parameters.