One of the major reasons customers hesitate to buy an electric car is its higher price as compared to its ICE counterpart. For example, the electric version of Tata Nexon costs about Rs. 4 lakhs more than its petrol variant.

Then again, parity between EVs and ICE vehicles doesn’t require the sticker price to be exactly the same. The most important deciding factor is the total cost of ownership (TCO), which includes purchase price, fuel costs and maintenance expenses. While the upfront cost of an EV is more, there are substantial savings in operating costs mainly because of two reasons: (a) lower cost of electricity as compared to petrol or diesel and (b) lower maintenance and repair costs of EVs because of vastly reduced moving parts.

Several pundits indicate that TCO for EVs is already lower than its ICE counterpart. Deloitte has concluded that the price has already reached parity, if you consider subsidies in various markets and TCO. Some more reserved analysts expect TCO parity between EVs and ICE vehicles as soon as 2024 to 2026 for shorter-range EVs and 2027 to 2030 for longer-range EVs.

The main reason for the higher price of EVs is the cost of the battery pack, which comprises 30-35% of EV prices. EV battery prices fell 6% between 2020 and 2021, reaching an average price of $132 per kWh in 2021. Battery prices need to drop below the US$100/kWh mark that has long been held as the magic number for EVs to reach parity with ICE vehicles.

BNEF expects battery prices to reach US$80/kWh in 2026 and US$60/kWh in 2029. Most analysts agree that price parity between EVs and ICE vehicles will occur sometime between 2023 and 2025.

Innovations in battery chemistry are also leading to EV cost declines. Whether it’s solid-state batteries, lithium-metal batteries, lithium-iron-phosphate batteries, or several other innovations, these new formulations are already leading to cost declines.

And then comes economies of scale. As sales volumes increase, production costs per unit decrease. The first half of 2022 witnessed a scorching growth of 62% in electric vehicle sales worldwide. Over 10 million EVs will be sold in this year.

Don’t forget that the ICE vehicles will get costlier as stricter emission norms come into force. Moving from Bharat Stage 6 to 7 will jack up the prices of fossil-fuel cars. Similarly, the Corporate Average Fuel Economy (CAFE) norms will inflate the prices of ICE vehicles. So, as the prices of ICE vehicles keep inching up and that of EVs keep going down, somewhere the twain shall meet.

In the UK, a recent annual ‘Driving away from fossil fuels’ survey report showed that 100% of new car buyers are ready to go for electric cars as long as they were sold for the same price as equivalent conventional cars. That number was only 2% in 2015.

If an electric car was available at the same price as a comparable combustion-engine car, which one would you buy?

But have you heard of Wuling Hong Guang MINI EV?

Chances are that the name doesn’t ring a bell. But it is the best-selling EV in China today. Introduced in June 2020 by a joint venture between SAIC, GM and Liuzhou Wuling Motors, the MINI EV has cumulatively sold more than 700,000 units till September 2022.

The secret of its success? It’s price. You can buy it for under $5,000. Sure, it’s no comparison to any of the Tesla models, and it’s a small car by any standards. But it’s a 4-seater, with a 120-170 km range and a top speed of 100 kmph. And it’s cruising at 35,000+ sales a month. In fact, it is the No. 2 bestselling EV globally in 2022, overtaking Tesla Model 3. The No.1 position is taken by Tesla Model Y.

By comparison, Tesla Model 3 has a starting price of $36,000 in China. The average EV sold in the US costs about $76,000 according to data from Edmunds.com.

Tesla accounts for just under two-thirds of the EVs sold in America.

But which is the best-selling non-Tesla EV in the US? It’s General Motors’ Bolt EV. It even outsells the Tesla flagships, the Model S and Model X. The reason again is simple – Bolt is America’s cheapest electric vehicle. Last summer, GM dropped the price of the Bolt EV by 27% to just under $27,000. The 2023 Bolt EV now has a starting price of $25,600. Sales have taken off like a Corvette Z06 in Launch Mode. The Bolt EV and its sibling, the Bolt EUV, have had record sales in the third quarter of 2022 with 14,000 deliveries. GM now plans to increase production from 44,000 Bolts this year to 70,000 next year.

There is clearly enormous potential for an affordable, respectable and practical electric car, which can address the needs of the middle-class customer. Even Tesla has announced a low-cost hatchback model, priced at around $25,000, possibly to be released sometime in 2023.

Closer home, Tata Motors opened bookings for the Tiago EV on September 29 with an ex-showroom starting price of just Rs. 8.5 lakhs. The response was electrifying – the bookings surged past the 10,000 mark in a single day!

In today’s world full of premium and ultra-luxury electric vehicles, the average car buyer with a daily commute to work and back home feels left out in the lurch. The likes of MINI EV, Bolt EV and Tiago EV are changing that and creating a whole new trajectory of EV sales. Affordable electric cars will hasten the process of EVs becoming mainstream. Hopefully, very soon.

The below graphic is a visualization of EV sales broken down by country.

Here are some key takeaways :
• From 2011 to 2015, global EV sales grew at an average annual rate of 89%, with roughly one-third of global sales occurring in the U.S. alone.
• In 2014, the U.S. was the largest EV market followed by China, the Netherlands, Norway, and France. But things changed in 2015, when China’s EV sales grew by 238% relative to 2014, propelling it to the top spot.
• In 2021, China accounted for more than 50% of EVs sold globally. The country sold more EVs in 2021 than the rest of the world combined in 2020.
• Germany, Europe’s biggest auto market, sold nearly 700,000 EVs in 2021, up 72% from 2020.
• The U.S. also made a comeback after a two-year drop, with EV sales more than doubling in 2021.
• Between 2011 and 2019, Tesla accounted for 40% of all EVs sold in the United States. Furthermore, Tesla cars have been the top-selling EV models in the U.S. in every year since 2015. Tesla accounted for over 50% of EV sales in the U.S. in 2021 with the Model Y—launched in 2019—taking the top spot.
• China, Europe and US contributed nearly 94% to worldwide EV sales. This shows that the growth of EVs is highly skewed amongst countries and regions of the world.

I must highlight that these figures are for light duty four-wheelers, essentially passenger cars. They do not include electric two-wheelers and three-wheelers, which are witnessing meteoric growth in Asian countries. But that’s another story.

Graph courtesy : Visual Capitalist
Link : https://buff.ly/3QBGpUu