A recently released auto industry report by the Economist publication has shown that consumers will pay far less to purchase an electric car by 2025. The report shows that by 2025 consumers will likely pay more to acquire a gasoline car than an electric vehicle. All this comes as good news to people who’d like to own an electric vehicle but feel constrained by the current price tag.

The decrease in battery prices will usher in cheaper electric vehicles

Many consumers are surprised to learn the most expensive part of an electric vehicle is a battery. Amazingly, batteries today account for approximately half the cost of an electric car. Pundits predict that these battery prices will fall by around 77% between 2016 and 2030. Colin McKerracher, a London-based researcher and analyst, notes that when the vehicles become cheaper, more people will purchase them. According to Ellen Hughes-Cromwick, who works at the University of Michigan’s Energy Institute as a senior economist, states that the situation is changing fast. The scholar notes that many technology companies, innovative startups, and motor vehicle manufacturers work around the clock to lower costs.

In fact, according to Hughes-Cromwick, the industry will achieve significant strides with competitive battery prices in the next three years. Almost instantly, drivers will make substantial savings. And electric cars will become accessible to global consumers.

Overall, these incentives have triggered a reduction in vehicle prices in several countries. Therefore, the evolution of battery technology means there’ll be a surge in the number of electric vehicles on the roads. And this will likely happen sooner than we think.

Technological breakthroughs will trigger lower vehicle prices globally

A recent Bloomberg New Energy Finance research demonstrates that the fall in battery prices will, indeed, make it cheaper to buy electric vehicles, not only in the US but also in Europe. According to Gilles Normand, the senior vice president of Renault (IW 1000/66), by 2025, the overall electric vehicle cost will match the regular internal combustion engine (ICE) vehicle’s price. Renault manufactures the popular Zoe electric car.

In a recent interview, Mr. Normand said the cost of EVs is undoubtedly set to go down with the current technological breakthroughs and increased vehicle manufacturing. Moreover, stringent industry regulations mean that the ICE cost is likely to go up. These factors favor better EV sales.

Battery prices are approaching $100 per-kilowatt-hour

According to the Open Grid Scheduler, prices of electric vehicles will soon rival the regular vehicle prices.  All this should happen once the battery prices fall below $100 per kilowatt-hour.

When will the change happen? According to researchers based at Pittsburg’s Carnegie Mellon University, electric car battery prices will probably fall to the desired range (under $100 per kilowatt-hour) by 2023, 2024, or 2025.

Many auto industry gurus are convinced that it will happen by 2025. The Carnegie Mellon University team, led by Venkat Viswanathan, first developed a model used to calculate EV battery costs. The model breaks down the individual component costs and subsequently predicts the changes over time.

According to BloombergNEF, in 2019, the average global battery price impressively shot down to $156 per kilowatt-hour. Using the newly designed model, the Viswanathan team reasonably demonstrated that battery packs could cost under $80 per kilowatt-hour in 2025. Other industry pundits, including BloombergNEF, readily agree with this prediction.

A small sedan will cost much less than the current $30,000

We must emphasize that the $100 battery benchmark achievement does not mean anyone can rush to the nearest showroom and drive away with an EV of any size, and the cost will be that of a regular gasoline car’s. It merely means you can get a compact sedan EV for the price of a gasoline-powered vehicle with similar features.

According to Viswanathan, the cost parity will first come with small sedans, which currently cost $30,000 or less. For SUVs and electric trucks that cost the same as similar-feature gasoline models, the automakers will likely need more time to design the vehicles. Why? For towing capacity, trucks and SUVs generally need more power. All these translate into larger battery packs and-ultimately- higher costs.

Conclusion

Electric vehicles will soon achieve a cost-competitive edge. This will undoubtedly transform a market that currently sells less than 2% of the merchandise as electric vehicles. Since transportation causes more than a quarter of all US emissions, this is great for the environment.

Ultimately, pundits describe electric vehicles’ arrival in the broader auto market as a triple win- for the economy, the climate, and clean air. Fortunately, with 2025 beckoning, we don’t have to wait too long to purchase our electric vehicles.