Luke Ottaway's picture

Hang in there - affordable electric cars are on the way

A new study confirms what EV advocates have been preaching for years: electric car prices will fall to match those of gasoline cars, we just have to be patient.

Electric vehicle supporters probably sound like broken records by now: “Just wait until battery prices come down, then internal combustion cars had better watch out!” Sure, we have been saying something along these lines since electric cars first re-entered the scene with the Tesla Roadster in 2009 and Nissan LEAF and Chevrolet Volt in 2010. But it really is true.

A new study published late last month in Nature Climate Change provided the latest affirmation that battery prices are trending strongly in the right direction, and perhaps at a faster rate than expected.

The authors reviewed more than 80 estimates of battery pack (not cell) costs made from 2007-2014 and found by fitting a log curve to the scattered data points that last year the average was $410 per kWh, down from $1,000 in 2007. “Market leaders,” i.e. Nissan and Tesla, have achieved at best guess a $300 per kWh price point.

As many have noted, that $300 per kWh just so happens to be the price at which the International Energy Agency projected that electric cars would become cost-competitive with their dinosaur-burning counterparts. That wasn’t supposed to happen until 2020 – those trailblazers of the EV industry are far ahead of schedule.

The authors of the study are of the opinion that $250 per kWh, not $300, is the target for cost parity. Others have argued that the critical battery price is $200 per kWh, while some claim $150 per kWh is necessary.

Looking ahead, the fitted log curve seems to predict that the market leaders will be somewhere around $250 per kWh in 2020, although Tesla’s Gigafactory will create a sharp deviation from that trend by lowering Tesla's prices by at least 30%. For Nissan, $250 per kWh is a reasonable expectation. The data for the rest of the industry indicates something close to $300 per kWh by 2020. The cost of battery packs has fallen at roughly 8% annually since 2007. Even Dr. Prabhakar Patil, CEO of LG Chem Power, is “somewhat surprised” at how quickly battery prices have fallen.

What are the implications of all this? While acknowledging that all estimates are uncertain, and generally vary widely in the case of battery prices, the implications of these results are of course huge. The cheapest mass-market electric car is currently the Nissan LEAF, which starts around $30,000. Most, like the Chevrolet Volt and Volkswagen e-Golf, are in the mid-$30,000 range.

Though that price bracket is not unduly expensive, it cannot be called “affordable” in the same sense that a Honda Civic or Toyota Camry is affordable. But once falling battery prices allow electric cars to be priced competitively with such best-sellers (without incentives), the whole equation of car buying changes. In fact, a $25,000 all-electric car can easily compete directly with a $20,000 gasoline car on a total cost of ownership basis, taking into account fuel and maintenance savings.

So to those who keep asking why electric cars are so expensive: hang in there. Starting with the second generation of electric cars – the 2016 Volt, 2017 LEAF, 2017-2018 Chevrolet Bolt and Tesla Model 3 – consumers will begin to notice that electric cars are either not as expensive as they used to be, can travel much farther on a charge, or both. Expect that trend to continue until electric cars become the norm rather than the exception.

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