Battery prices have been falling consistently and as a consequence the price of electric vehicles is now set to fall below that of petrol and diesel models, in what is being described by some analysts as a ‘tipping point’ for the electric vehicle industry. Even without subsidies, this seismic event is likely to happen in around 2-3 years.
Norway, where tax breaks mean electric cars are cheaper, saw the market share of battery-powered cars soar to 54% in 2020 well ahead of most other European countries where sales account for around 5 per cent.
Demand for electric vehicles has been held back by a combination of price and by ‘range anxiety’, but with prices falling and new batteries with increased ranges coming to market the market is changing, and rapidly.
These trends, together with Government grants and tax relief, are expected to see the adoption of electric vehicles taking off and real market penetration being achieved .
The success of electric vehicles in Norway has highlighted the fact that once prices fall below petrol and diesel equivalents, then sales and market share go up rapidly.
BloombergNEF’s analysis is predicting that lithium-ion battery costs will fall to the extent that electric cars will match the price of petrol and diesel cars by 2023, while McKinsey’s Global Energy Perspective 2021, says that “electric vehicles are likely to become the most economic choice in the next five years in many parts of the world”.
The fall in battery prices in the past decade has been dramatic and much faster than most people predicted, with today’s battery pack costing just over $4,000. Compare that to the $30,000 cost ten years ago, and further price reductions are expected as further manufacturing improvements come online.
More advanced technologies, such as solid state batteries, are expected to enter the mass market by 2030, if new manufacturing methods can be developed, and then prices could fall even further.
With the level of investment and research accelerating the electric vehicle ‘tipping point’ is approaching far faster than many expected just a few years ago.
