Electric cars set to become more affordable

author: FutureCar Staff    

Automakers such as Ford have been slowing down electric vehicle (EV) production due to stalling demand, citing the high cost of EVs as a major factor. However, there is hope for a change in the near future as new batteries, production methods, and improved charging networks are expected to bring down prices.

One of the main reasons for the affordability problem of EVs is the lack of cheap options. In September, the average price of an EV was just over $50,000 according to Kelley Blue Book data. Auto executives have acknowledged that high prices have contributed to the slump in demand this year, leading to several automakers postponing or abandoning their EV plans.

Despite this, EV sales are on the rise, with more than 1 million electric vehicles expected to be sold in the U.S. this year, capturing a record 9% of the passenger car market. However, the U.S. still lags behind other countries such as China and Germany, where EVs accounted for 33% and 35% of sales, respectively, in the first three months of 2023.

Tesla is reportedly planning to introduce a $27,000 car into production next year, and advancements in EV technology are expected to contribute to a significant drop in prices. Goldman Sachs even predicts that EVs will achieve price parity with gas-powered cars by the mid-2020s.

There are three key reasons why electric cars are becoming more affordable. Firstly, the cost of battery packs, which is the most expensive component of an EV, is expected to decrease. The Department of Energy estimates that the price of a lithium-ion battery pack has already dropped by 89% between 2008 and 2022, and Goldman Sachs projects a further 40% decrease by 2025. New classes of batteries, such as sodium-ion and solid-state batteries, are also being developed, offering more sustainable and cost-effective options.

Secondly, the expansion of charging networks will contribute to lower prices. A more extensive charging infrastructure would allow manufacturers to rely less on powerful range-boosting batteries, making vehicles lighter and cheaper to produce. Tesla's charging network is rapidly expanding, and other automakers like Ford and GM have announced plans to use Tesla superchargers, which will help boost the U.S. charging infrastructure.

Lastly, economies of scale play a significant role in reducing EV costs. Automakers need to produce a certain volume of EVs to achieve profitability and lower costs. As production increases, there will be more innovation and improved efficiencies in the manufacturing process. Some companies, like Tesla, are already implementing new production techniques such as "gigacasting" to reduce costs. However, there are concerns that these methods may make it more challenging to replace car parts and could lead to higher repair costs.

Overall, with advancements in battery technology, the expansion of charging networks, and economies of scale, the future looks promising for more affordable electric cars.

FutureCar Staff