EVs Close the Cost Gap With Petrol Cars as Battery Prices Fall
Analysis shows plug-in hybrids and pure electric vehicles are now rivalling petrol models on total ownership cost, with battery prices dropping and sales rising through mid-2013.
Plug-in hybrid and pure electric vehicles have reached cost parity with petrol-powered cars sooner than many expected, according to analysis by the Electrification Coalition. The group’s review of purchase price, maintenance, fuel, residual values and US federal tax credits found that by 2013, short-range plug-in hybrids were already matching internal combustion and hybrid rivals on total cost of ownership. The analysis predicted that by 2017, battery electric vehicles would also be directly competitive on the same basis.
The sharp drop in lithium-ion battery costs has been central to this shift. Battery pack prices fell from $1,000 per kilowatt-hour in 2008 to about $600 per kWh by 2012. Analysts cited in the study expected prices to fall further, reaching $300 to $325 per kWh by 2020. These reductions have helped narrow the upfront price gap between electric vehicles and their petrol counterparts, making EVs more viable for private and fleet buyers alike.
US plug-in sales accelerate in 2013
Sales data from the first half of 2013 reflected rising demand for plug-in vehicles in the US. Over 110,000 plug-in cars had been sold cumulatively by July, with June 2013 marking the best month on record at 9,000 units. Nissan delivered 2,225 Leaf EVs in June, a 315 percent increase over the previous year, while GM sold 2,698 Chevrolet Volt plug-in hybrids, up 53 percent year-on-year. Tesla contributed 1,425 Model S electric saloons to the tally that month.
- Nissan Leaf: 2,225 units sold in June 2013 (+315% year-on-year)
- Chevrolet Volt: 2,698 units sold in June 2013 (+53% year-on-year)
- Tesla Model S: 1,425 units sold in June 2013
The growth in sales coincided with expanding model choice and greater public awareness, as well as ongoing support from federal incentives. These factors, combined with falling battery costs, have contributed to the narrowing cost gap between electric and petrol-powered vehicles.
Cost parity driven by battery and policy
The Electrification Coalition’s analysis took into account not just sticker prices but also running costs and incentives. Maintenance and fuel costs for electric vehicles are typically lower than for petrol cars, while federal tax credits in the US have provided a further boost to affordability. The group’s vice president of policy, Jonna Hamilton, indicated that the total cost of ownership for battery electric vehicles would be competitive with internal combustion engines by 2017, with plug-in hybrids already there by 2013.
The shift has implications for manufacturers and buyers. As battery prices continue to fall and more models enter the market, the economic case for electric vehicles is expected to strengthen further. For manufacturers, the trend supports greater investment in EV development and production capacity, while buyers benefit from a wider choice of cost-competitive alternatives to petrol cars.
Further battery cost reductions and infrastructure investment, such as China’s $763 million commitment to charging stations by 2015 (/china-to-invest-763m-in-ev-charging-station-infrastructure-by-2015), are likely to reinforce this trend. European manufacturers are also lobbying for regulatory flexibility as they adapt to the growing role of EVs in meeting emissions targets (/european-automakers-lobby-for-eased-co2-ruling).
