Electric cars will be CHEAPER to make than petrols by 2027 – here’s why

The price of a new electric car will fall to the same level as that of an equivalent new petrol or diesel model “much faster than initially expected”, a report published this month claims.

This is because, on average, electric vehicles (EVs) will be cheaper to manufacture than cars with internal combustion engines by 2027, says US market research firm Gartner.

However, it is not all positive news for the transition to electric vehicles.

This is because repair costs will increase, and that means a battery-powered car is more likely to be written off in the coming years.

One of the biggest obstacles facing electric vehicles is their higher starting price, which along with concerns about a lackluster public charging network and range anxiety have caused public demand for battery models to drop significantly in recent months. .

Official figures show that sales of electric vehicles to ordinary drivers fell by almost a fifth in the first two months of 2024.

Of the almost 40,000 new electric cars registered in January and February, only 6,500 were purchased by individuals.

The remaining 33,500 (representing around 84 per cent of all registrations in the two months) were purchased by fleet and leasing companies as a result of lucrative tax benefits, including the salary sacrifice scheme.

But Gartner predicts this could all change starting in 2027, when lower manufacturing costs should begin to translate into affordable electric vehicle prices.

It claims that over the next three years new manufacturing methods will reduce production costs below those of a comparable internal combustion engine vehicle.

In its new report released this month, it said it expects construction costs to fall considerably faster than the cost of batteries, which are the most expensive part of an electric vehicle and account for about 40 percent of the vehicle’s price.

The research group’s bold statements are based on the belief that “innovations that simplify production costs, such as centralized vehicle architecture or the introduction of gigacasting, help reduce manufacturing costs and assembly time.” .

‘Gigapresses’ are massive casting machines pioneered by US market leader Tesla to manufacture large individual parts of vehicle underbody, streamlining production and reducing the work of robots.

This new technology – and automakers adapting the design of their vehicles to make them more efficient in construction – “will cause BEV production costs to fall considerably faster than battery costs,” the US company said.

Gartner says the new manufacturing methods will reduce production costs below those of a comparable internal combustion engine car within the next three years.

The research group’s bold claims are based on the belief that innovations that simplify production, such as Tesla-style gigcasting, will help reduce manufacturing costs and assembly time for electric vehicles.

“New OEMs want to greatly redefine the status quo in automotive,” explained Pedro Pacheco, research vice president at Gartner.

“They brought new innovations that simplify production costs, such as centralized vehicle architecture or the introduction of gigacasting that helps reduce manufacturing costs and assembly time, which traditional automakers had no choice but to adopt to survive”.

Is the high cost of electric vehicles about to drop yet?

There are currently only seven electric cars on sale in the UK priced at £30,000 or less.

This includes the Vauxhall Corsa Electric (from £26,895), BYD Dolphin (from £25,490), MG4 (from £26,995), Fiat 500e (from £28,195, although it drops to £25,195 with Fiat’s e-grant scheme), Nissan Leaf (from £28,495 while stocks last), Mazda MX-30 (from £28,995) and next-gen Mini Cooper E (from £30,000).

Dacia’s first electric vehicle, the Spring, should change the price targets of the electric vehicle market when the first deliveries arrive in October.

That’s because the budget brand has recently confirmed that its electric vehicle with a 137-mile range will start from £14,995, making it the sixth least expensive new car across all fuel types.

The existing price premium for manufacturing and selling electric vehicles is such that some major brands are already backtracking on their electric car promises.

It was revealed earlier this month that German car giant Mercedes-Benz will extend the production cycle of one of its best-selling models due to concerns over the adoption of electric vehicles.

The A-Class hatchback, which was due to retire at the end of this year, will continue to be manufactured until 2026 as part of a more “flexible” strategy by Mercedes for the transition to electric vehicles.

CEO Ola Källenius has said the company will continue producing combustion engine cars based on existing platforms well into the next decade because price parity between electric and gasoline vehicles “is many years away.” distance”.

Electric vehicles could be cheaper to buy, but they will also be more expensive to repair

While Pacheco was positive about the outlook for EV manufacturing costs and prices for new models, he sounded alarm bells by saying that repair costs will be “considerably more expensive.

The market research firm expects that the average cost of repairing the body and battery of an electric vehicle after a serious collision could increase 30 percent by 2027.

That could make crashed electric vehicles more prone to a total write-off, as Gartner added that repair could cost more than the residual value of the vehicle itself.

The high costs associated with electric vehicle repair are already a concern among potential buyers.

An investigation by Reuters last year found that insurance companies increasingly have little or no choice but to permanently remove electric vehicles from the road after minor collisions, which in turn is raising premiums for all drivers. .

The report warns about the accumulation of scratched and slightly damaged batteries in scrapyards in some countries.

In recent months, British owners of Chinese electric vehicles have complained about rising insurance premiums, with some of them unable to find affordable cover for their new cars.

This is due to a lack of available parts and expertise to repair them, which has caused premiums to skyrocket.

Drivers of BYD and GWM Ora vehicles face extremely high coverage quotes because only a few insurance providers will underwrite them due to the difficulty of repairing them.

Gartner says there could be a “consumer backlash” if reductions in production costs come at the expense of higher repair costs.

And there was more bad news for new electric car manufacturers.

The market researcher also expects that around 15 percent of electric vehicle companies founded since the last decade will be acquired or go bankrupt by 2027.

«This does not mean that the electric vehicle sector is collapsing. It is simply about entering a new phase where companies with the best products and services will win over the rest,’ Pacheco added.