Study predicts electric cars will be as cheap to produce as petrol and diesel counterparts by 2026 writes Geraldine Herbert
Electric saloons and SUVs will be as cheap to produce as petrol and diesel models by 2026, according to a new study commissioned by Transport & Environment, a European think tank. This is one of many studies forecasting when electric cars will achieve price parity with petrol and diesel, and while some predict parity much earlier in the decade, they all agree that the days of expensive electric vehicles (EVs) are nearing an end.
Price Parity
It has long been expected that cost parity between electric, petrol and diesel models will be the tipping point in favour of electric car sales. Given how cheap EVs are to run, it will not make financial sense for most people to choose a petrol or diesel car. In Norway, where parity already exists owing to extensive Government supports, 76% of new cars bought are electric. Price parity will also mean the end of subsidies and grants that currently exist to bridge the cost gap between EVs and fossil-fuelled cars.
Ev Sales
There are currently around 30,000 EVs on Irish roads and sales of electric cars are rising. EVs make up over 6% share of the new car market, and when combined with plug-in hybrids and regular hybrids that share jumps to over 30%, so one in three new car buyers are not opting for petrol and diesel.
So far this year 3,414 battery-electric cars have been sold, but price disparity with petrol and diesel cars remains the biggest barrier to sale. Affordability is a key consideration for consumers and many are unwilling to pay a premium for electric cars. An electric version of Peugeot’s 208, one of Ireland’s most affordable.
High Prices
EVs, starts at €27,495, while a petrol version costs from €19,930 and a diesel €23,690. Similarly, a petrol version of Opel’s new Mokka costs from €23,295, but the electric model is priced from €33,038.
The two main drivers of this price difference are the costs associated with batteries and with producing electric vehicles on the same chassis as internal combustion engine cars. The anticipated reduction in EV costs is likely to come from falling battery prices, which are expected to reduce by 60% over the decade. Carmakers’ manufacturing strategies also play a role and savings of up to 30% can be made by switching to vehicle platforms specifically designed for EVs as this allows for a simpler assembly, standardised battery packs and higher volumes.
The new research predicts the pre-tax retail price for a medium battery-electric car with a range of 400km would drop from €38,000 in 2020 down to €20,000 in 2025 and to as little as €16,000 by 2030. By the end of the decade, the average battery-electric model is likely to be 18% cheaper than the equivalent petrol or diesel.
The move away from Fossil Fuels
The entire car industry is shifting its focus from petrol and diesel to electric cars, one of the most fundamental transformations the automotive industry has faced in decades. In addition, strict CO2 targets imposed by the EU require carmakers to reduce their overall fleet CO2 emissions to 95g/km in 2020/21.
As a result, more and more EV models are being launched and major carmakers are announcing plans to phase out sales of petrol and diesel. Mini confirmed its last combustion engine model will be launched in 2025 and the brand will become electric-only from the early 2030s; Jaguar is aiming to be an all-electric brand by 2025; Volvo will go fully electric by 2030; GM by 2035; and Ford in Europe will sell only EVs from 2030. Volkswagen recently announced a new target for 70% of its sales in Europe to be EVs by 2030, up from a previous target of 35%.
Ireland is one of ten European countries with long-term policy goals of phasing out sales of internal combustion engine (ICE) vehicles and it is planned to ban the sale of new petrol and diesel cars by 2030. Earlier this year a nine-country coalition – led by the Netherlands and Denmark and including Austria, Belgium, Greece, Ireland, Lithuania, Luxembourg and Malta – called on the European Commission to set a phase-out date for the end of the sale of ICE vehicles.
Government’s Target
The Government’s Climate Action Plan aims to have 840,000 passenger electric vehicles and 100,000 electric vans on the road by 2030. It is estimated that the national fleet will reach 3 million cars by 2030, so the target is simply based on a third being electric. So how realistic is this target?
The impact of Brexit and Covid on car sales in Ireland is likely to be significant. Covid has resulted in a sharp decline in car sales, and last year the new car market shrunk by 25%. Analysts are predicting the European car market will not recover to pre-Covid levels until 2024. It is, however, predicted that the pace of recovery will be a result of a slowdown in ICE sales rather than a slowdown in EVs. In addition, changes introduced in last year’s budget has made used car imports more expensive. This, coupled with new VAT and customs charges due to Brexit, will reduce the number of imports.
Challenges
There is no doubt that meeting the target is going to be a challenge, but arguably more important than the actual numbers is the rate of the transition to electric cars. Quantifying the number on the roads by 2030 is not helpful and there are many who regard the target of 840,000 as so wildly ambitious it is not even worth planning for. It is hardly surprising that radio discussions and debates in the Oireachtas regularly dismiss it as “ludicrous”.
The plan from the start should have been framed in terms of a percentage share of the new car market. Far from ludicrous, it is very reasonable to expect that the EV market share will grow by at least 5% every year until around 2025, and then it will increase by around 10% per year – culminating in electric cars accounting for 65% or more of new car sales by 2030.
Until price parity is achieved, Government investment will continue to be required as many EV markets demonstrate that sales decline when subsidies are reduced. Investment in the public charging network must be in line with targets also. Transport & Environment suggest Ireland will have to install around 26,000 public charging points by 2030 and at least 12,000 by 2025.
The Future is now
It is time to start framing electric car targets as achievable, otherwise they risk being dismissed as little more than earnest virtue signalling. Creating an accessible and reliable charging network and continuing grants and subsidies is crucial if real progress is to be made. But the biggest obstacle to change seems to be convincing the public that electric cars are no longer just a green alternative, but the new normal.
A version of this article, by the author, first appeared in the Sunday Independent on May 16th, 2021
Geraldine Herbert
19th May 2021
