How Long Until Electric Vehicles Are Actually Cheaper Than Gasoline Models?

Matt Posky
by Matt Posky

Electric vehicles haven’t quite caught up to internal combustion models in terms overall cost effectiveness. In fact, if it weren’t for government incentives, there would probably be significantly fewer early adopters willing to shoulder the financial burden for the rest of us. However, EVs will eventually become the cheaper option on the market — with or without a tax credit.

While the obvious fueling benefits drastically reduce the cost of ownership, those savings don’t offset the higher buy-in price, especially with gas prices still relatively low. Batteries aren’t cheap, but costs are estimated to drop by around 77 percent between last year and 2030. That may sound like a lifetime of waiting if you’ve been holding out on an electric but, thankfully, the affordability tipping point should occur much sooner than that.

“On an upfront basis, these things will start to get cheaper and people will start to adopt them more as price parity gets closer,” said Colin McKerracher, analyst at Bloomberg New Energy Finance. “After that it gets even more compelling.”

Bloomberg forecasts EVs will represent around 35 percent of all new light-duty vehicle sales in 2040, some 90 times the numbers seen in 2015. However, the normalization of battery-driven vehicles should help drive down prices to competitive levels by 2025 — at least in Europe and North America. Some automakers expected the reduced cost of ownership to make up the difference even earlier than that.

Renault is anticipating total ownership expenditures on EVs to equal conventional internal combustion units by the early 2020s. Fuel prices will play a significant factor in deciding exactly how soon the change will occur, but it’s safe to say it’s not too far off.

“We have two curves,” Gilles Normand, Renault’s senior vie president for electrics, said in an interview earlier this month. “One is EV technology cost reductions because there are more breakthroughs in the cost of technology and more volume, so the cost of EVs will go down. ICE going to go up as a result of more stringent regulations especially regarding to particulate regulations.”

Even if gas prices stay level, regulatory measures against vehicle emissions are likely to keep average ICE production costs from ever dropping. That gives electrics the opportunity to overtake them in 2025 and gradually become more affordable in subsequent years.

[Image: Ford Motor Company]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Hummer Hummer on May 28, 2017

    I'd buy a Tesla, it's range is right (I have plenty of road trip trucks), it's size is big enough, it's made in America. Price is the problem. When I buy a vehicle I'm second to the vehicle buying the engine. A truck with a 8.1L has no problem getting me to open my wallet for $60k, the same truck with a 2L is worth about 15k to me. I can't reasonably put down $50k on a car that doesn't have something I can be proud to drive. For $25k I'll buy a Model S tomorrow. I don't see that happening. And the rest of the EV jokes are good for a laugh but compact economy cars regardless of their range, offer me no use.

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    • Hummer Hummer on May 29, 2017

      @Hummer They have to offer me something for my money, if I'm not listening to a V8 or a gas turbine, I require a different checklist to meet my needs. I didn't say it was reasonable.

  • Lorenzo Lorenzo on May 28, 2017

    According to my most recent electric bill, I was charged $39.64 for 184 kWh. They break it down to generation, transmission, delivery, and government fees, but by my reckoning, that's 21.54 cents per kWh. Also included in the bill was four requests by the utility for increases in various charges, and the local utility said increased costs would raise the "nominal" rate of 15.2 cents/kWh to 25 cents by 2025. With West Texas fracking now the swing producer likely to keep gasoline prices low, that rate to recharge an electric car is not going to result in any savings at all. The price of electric vehicles will have to drop substantially, or the government credits will have to increase, instead of being phased out.

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    • Lorenzo Lorenzo on May 29, 2017

      @mopar4wd I'm not in Texas, I'm in San Diego, still suffering the after-effects of the latest bright idea from the crazy people in Sacramento. your electricity cost in Connecticut is virtually the same, you're paying 21 cents, I'm paying 21.54 cents, and those are both too high. Coal-fired electricity generation was MUCH cheaper, and floating bed technology and stack scrubbers made emissions competitive with natural gas, but the price of that natural gas is marginally higher, so utilities are using the excuse of that added expense to stick it to residential customers. Electricity usage has dipped due to customers switching to LED and CFL lighting, reducing their usage, and the utilities are making up the revenue loss with higher prices.

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