According to new research from the investment bank UBS, electric cars will cost the same as conventional vehicles within four years and it predicts that we are about to see an acceleration away from traditional fossil fuel powered vehicles.
The research says that the difference in cost of producing battery and conventional vehicles will narrow in the next few years and disappear almost entirely by 2024.
The extra cost of manufacturing battery electric cars versus their fossil fuel equivalents will diminish to just £1,470 per car by 2022, and disappear completely by 2024, according to new research, which is based on detailed analysis of batteries from the seven largest manufacturers.
Big carmakers have been unenthusiastic to shift production away from their profitable internal combustion engine models towards electric cars because of expensive batteries, which are almost exclusively made by east Asian companies.
However, USB have warned that those carmakers that try to hang on to ICE sales risk being left behind by rivals such as Tesla and Volkswagen, the world’s largest carmaker by volume, which has dedicated more than £29bn into selling electric cars.
The investment bank also believe that the reduction in battery costs would also largely eliminate the financial case for hybrid electric vehicles, which combine a battery with a conventional engine.
Battery electric cars still command significant premiums over conventional counterparts, a key factor limiting electric car take-up. A new Volkswagen Golf costs around £20,000, whereas the ID-3, its first mass-market electric vehicle, will cost from £29,990.
The cost difference between electric and conventional vehicles remains significant with electric vehicles costing anything between £10-20k more than their fossil fuel counterparts, so a rapid fall in the costs of producing battery vehicles will be welcomed. Additionally, according to UBS, this price drop will trigger a much faster switch to electric vehicles than previously expected.
Electric vehicle sales are already increasing in the EU and China, despite the hit to the car market caused by the coronavirus pandemic.
The next big challenge will be manufacturing enough batteries, hence the growing interest in subsiding the development of multiple ‘gigafactories’ across Europe. UBS have stated that the Global market share for electric cars would reach 17% by 2025 and that before 2030 electric cars should account for 40% of global sales.
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