[RahulNagaraj]

According to media reports, batteries make up almost one-third of the cost of producing an electric vehicle. However, a new report by Goldman Sachs suggests that with the cost of batteries declining, EV prices could soon come close to their ICE-powered counterparts.



The report from Goldman Sachs also mentions that the average global cost for batteries in 2024 was $115 per kilowatt hour - almost 23% lower than last year. The report also states that it expects these prices to further reduce by up to 20% in 2025.

Alan Taub, Director of Michigan Materials Research Institute, stated "The cost is dropping dramatically through technology. Right now, there's nothing that looks like the Achilles heel of 'you can't get there'."

Similarly, Kieran O'Regan, Co-Founder of about:Energy - a battery data and software company, stated, "Raw material prices are a significant factor in the overall cost of EV batteries. As battery prices decrease due to technological advancements, the contribution of raw material costs becomes more significant."

As of June 2024, Kelly Blue Book states that the average cost of an electric vehicle in the USA was $56,371, just slightly higher than its ICE counterpart priced at $48,644. Part of the price disparity is also because drivers in the USA tend to purchase bigger vehicles, requiring larger & more expensive batteries.

Goldman Sachs estimates that EVs and ICE cars will reach price parity in the USA somewhere between 2025 and 2026 - this is without accounting for any government subsidies. This will also bring down the cost of ownership of the vehicle as well.

Nikhil Bhandari, Co-head of Asia-Pacific Natural Resources & Clean Energy at Goldman Sachs, stated, "There is a time lag that we need to account for here and that's why 2024 is still a tough year from an EV demand perspective, but we do see catalysts opening up in 2025 from a demand perspective."

Source: Autoblog

Link to Team-BHP news

[shortbread]

I would argue that we are approaching a turning point where car manufacturers may find it more cost-effective to produce high-performance electric vehicle (EV) variants than traditional internal combustion engine (ICE) models. As environmental regulations tighten and the complexity and costs of emission control systems increase, the inherent simplicity of EV powertrains will likely lead to lower production costs. Additionally, battery prices are steadily decreasing, and as new battery factories in India become operational, we can expect even further reductions. While this notion may seem far-fetched now, it's worth recalling the dramatic evolution of solar panels from a pricey niche technology to an affordable and widespread solution in just 15 years.

I refer to this situation as a predicament because once it reaches this point, traditional carmakers with substantial internal combustion engine (ICE) manufacturing infrastructure/investments face a significant challenge. Their investments in engine and gearbox assembly lines, casting facilities, and component suppliers risk becoming underutilized. For instance, Toyota, the world's most indebted corporation with global corporate debt nearing $200 billion has an annual production capacity of 14 million engines; if I'm not wrong. This immense capacity underscores their reluctance to fully embrace electric vehicles (EVs).

[darkgamer]

It’s already reached price parity or even EVs being cheaper in India due to government’s taxation structure.

EVs have 5% GST while ICE cars have 28% + upto 22% cess. This isn’t visible much in cars around the 10 lac mark but as cars get to 15-20-25 lacs, the GST difference grows linearly while the battery cost difference relative to vehicle price shrinks.

As we get vehicles over 20 lacs like Curvv today, we will see EVs get cheaper and more performant. At 30-40 lac segment we will see a massive difference for made in India EVs.

[carmayogi]

We're already seeing this in Tesla's pricing. They're easily competitive with BMWs, Audis, Mercs of similar size and performance.

There's been a lot of noise in the news about EVs and demand and such but people need to realize that this is just the first or second innings of a multi-year process.

From the perspective of Tesla itself. Their cheapest car went from $150,000 to $39000 (today) over 10-15 yrs. Today's car is faster, longer range and larger than the OG roadster. Obviously, their next gen will be even cheaper.

IMO by 2030, the discussion about the end of ICE will not be if but when.

[alphamike_1612]

To counter this viewpoint and play the devil's advocate-

Aren't EVs simply replacing oil with lithium and other rare earth minerals, in addition to power production from unclean sources (coal), not to mention the losses encountered in its transmission and infrastructure required should EVs boom especially in countries like India, where we are reliant on old and EoL infrastructure that is already at its borderline limits if not pushed beyond the limit?


In this situation, why do countries continue supporting EVs (read less taxation on EVs/ higher taxation on ICEs) other than for economic/employment reasons?

[SKC-auto]

Originally Posted by alphamike_1612

Aren't EVs simply replacing oil with lithium and other rare earth minerals

Lithium is not equivalent to Oil, if your car gives mileage of 20 kmpl and you need to travel 1000 kms, you need 50 litres of oil (or 36kg of oil).

A typical EV has 7kg of lithium, when you need to go 1000kms distance in an EV, you do not fill lithium, you charge it with electricity. Batteries can be recycled 95% today, that 36kg oil is pffff.

Electricity generation is increasingly shifting to renewables. Meanwhile, electricity is also used in oil refining, a single oil refinery uses as much electricity as a small city.

Lastly, there are no rare earth minerals in a lithium battery.

[shortbread]

Originally Posted by alphamike_1612

To counter this viewpoint and play the devil's advocate-

Aren't EVs simply replacing oil with lithium and other rare earth minerals

How? A battery is a one time investment and the rear earth minerals form a very very small fraction of the cars price. So you only buy it once.

Oil, is a recurring expense, you buy it daily or weekly or monthly, you buy it again and again. Hence why India imported 232.5 million metric tonnes (MMT) of crude oil in the financial year 2023-24. We're the world's third-biggest oil importer and spent a staggering $132.4 billion importing oil in fiscal year 2023-24.

That is why it's important for the country's energy independence to be self reliant, and using electricity for transportation is a solution. We have enough coal resources and have rapidly expanding renewable capacity.

This has been discussed elaborately and repeatedly on multiple threads regarding EVs.

[GTO]

Mod Note: No more off-topic posts please. Let's discuss just EV price parity with ICE cars here.

Back to the topic, it is not just falling battery prices. But also, lower than expected customer demand. A majority of customers simply prefer ICE cars today (whether petrol, diesel or hybrid) and the fact is, demand for EVs isn't as strong as originally anticipated. Almost all global manufacturers have revised their mid-term EV targets downward.

Car manufacturers have realised they cannot get away with over-optimistic EV pricing. They need to price them better for the astute customer.

[N4Nikunj]

Only pricing advantage will not motivate consumers to go ahead and buy the EVs.

To attract consumers the cars should be fuss-free, niggle free, and more importantly, the after-sales service should be top-notch. Be it a small car or a big costly barge.

In today's day and age, any ICE or EV is a complex technology. The ICE cars are no more simple to work on. We can see service centers flooded with cars be it of any brand.

EVs can't simply worked by roadside mechanics. Manufacturers should also focus more on increasing the no. of service centers with more serious service staff.

[shobhit.shri]

Originally Posted by GTO

[b] But also, lower than expected customer demand.

I feel electric has become the third option alongside petrol and diesel, each with its own pros and cons. None of these three is a replacement for the others.

However, this also means that if we see another oil price shock like in 2012-13, the demand for EVs will go through the roof.

[MightyHorse1188]

Hey Fellow BHPians,

Just adding another perspective to this discussion. In India we can already see a natural economic advantage enjoyed by EVs compared to their ICE counterparts when someone is in the market for Premium/High end or luxury segment vehicles.

The explanation is simple, let me first give the example of tax on tax with high value ICE vehicles, most of them are imported after paying steep custom duties. Upon which they are subjected to further taxation in the form of highest slab of GST and then the road taxes, and it each stage of incremental tax, the value of tax is computed including the already high taxes right from customs to GST.Ultimately one ends up paying a very significant share as taxes in comparison to actual fair value of the car. Im sure this is not a new concept and that is what explains why cars cost a fraction of what we pay here in places like the UAE and even the US.

On the other hand if the similar vehicle had an EV counterpart (Like in case of the i5 and the 5 series), you would in this case only be liable to the customs duty ( which is slightly lower compared to that for an ICE) and much lower GST at 5% (in comparison to 28% otherwise) and ultimately 0 road tax in most states, making the car a bang for the buck without even considering subsidies offered in few states and accelerated tax depreciation(If you are a business owner).So If you notice the EV version of the car will cost the same, if not a little lower in India, although the basic cost of EV itself is generally 20-30% higher.

If one took a decision purely on economics, it's almost a no brainer that EV makes more sense and you are deriving the most value out of your spending and also completely ignoring the much lower running costs of EV here. However that is not the case in reality, most car buyers in that segment still prefer the ICEs since most of them are petrolheads at heart.There is enough anecdotal evidence including on Team BHP where people say ICEs and equally powered EVs are not the same since the driving is more spirited in a petrol car with all those exhaust notes we love and similar nuances that an EV would miss out on.

So lot of times emotions overweigh the finances during decision making. However the lower battery cost will definitely be more impactful in the mass market products where we Indians at large are cost conscious. That being said I personally think this alone cannot be a major catalyst for EV adoption, unless other steps are taken towards improving/standardising EV charging infrastructure at large and reduce the range anxiety amongst the people.It is also very important to solve the chicken and egg problem faced by most urban households.Lot of my friends/people I know want to buy an EV but are holding back stating reasons like "I would love to buy an EV but not sure if I can Install a charger in my apartment".

I would like to end by saying that there are lot of folks who would be okay to pay a premium for an EV to move towards a green lifestyle, so it is the fundamental issues of practicality holding them back more than financial incentives.


Cheers

PS: I made a decision with my brain rather than heart, and became one of the early adopters of EV like many of you on this thread, after I brought a BYD Seal recently. Thoroughly enjoying it so far, using it like my daily driver and the performance is brilliant and never thought I could ever realise that kind of experience in any car of it's price range.

[vamsi.vadrevu]

I'd been reading about such reports since 2018. I've yet to see a car around 10 lakhs that delivers the reliability and fuss free ownership experience that an ICE car provides at that price.

The ICE technology is extremely mature at close to 150 years.
The EV technology (specifically the battery tech and the battery management systems with inverter/converter units) is still nascent. We haven't even standardized the core voltage architecture of batteries. There's no DC fast charging standards. And the charging experience is mediocre and a hit and miss with many brands (sans Tesla).

I truly believe that the future of automobiles is EVs. But we're definitely not there yet. And definitely not by 2025. May be at higher prices above 40 or 50 lakhs, there is price parity. But definitely not for 10 to 15 lakh rupees cars.

When Nexon EV was launched in 2020, I had truly believed we were just 2 or 3 years away from mainstream EV adoption. But sadly the rate of progress has not been quick enough.

I've had to buy an ICE car in 2023 in the interim until EVs gain full prominence.

[Pikachu77]

My point is that the price parity also depends on the usable real world range of the Cars. The Curvv for example, has achieved price parity for a range of 350-400 kms with 167 ps of power. This might not be true if the range needs to be 500 kms for consideration as the battery size would go up.

Taxation for above 4m cars play a very important role in achieving the parity as of now. If the battery prices would be falling 20 percent more by 2025 as predicted in the article, we might have price parity for a range of 500 kms in above 4m cars provided the manufacturers pass on the benefits.

I am sure that if not for the falling EV sales monthly, Tata would have priced the Curvv 1 -2 lakh more than the current pricing as Introductory and would raise even further after some thousands of sales.

Sub 4 m cars have to do with lesser range for the next 2-3 years till the price parity would become a reality for a usable real world range.

[DIY410]

The OEMs in India still have a fat margin. CATL price for LFP battery cell is 56 USD/kWh. Add customs and shipping, even if it costs double at 112 USD/kWh in India.

A fully assembled 100kWh battery should cost less then 10 Lakh with BMS and liquid cooling. Couped with 5% GST and low import duties on cells, the battery price in reality is far less. A 40 ft shipping container can accommodate around 1000kWh of battery cells and shipping cost is less then 1k USD.

If it wasn't for MG being aggressive in their pricing on ZS EV, we would have never gotten the price cuts. Remember in February, a week before MG announced the price cuts on the ZS EV and Comet. Tata increased the prices of their EVs citing input cost and then magically cut the price a few days later in response to MG.

[Dibyendu Bose]

When we discuss the price parity of EVs n ICE cars, the hope and aspiration that is embedded in that narrative is that the life cycle cost of an EV will be far less, or in simpler terms, one will gain economically if an EV is purchased instead of an ICE car.

But I shudder to think that what will actually happen if indeed that parity is achieved in the auto industry, and that also so quickly. Theoretically no one will buy an ICE car, as it will be economically sub optimal. And the disruption therefore in the entire industry will be immense. Is that really a possibility? There are too many questions still existing on the subject.

Plus where is the charging infrastructure for such a humongous number of cars. Most housing societies are unable to provide home charging facilities as they are unable to provide the infrastructure in the underground garages (with separate meter etc). The society where i live in has an added anxiety of underground fire safety measures and is not giving permission for home charging.
And even if every other constraint is removed, the distribution network needs infrastructure upgrades (eg transformers etc), which currently is a contentious topic between discoms and housing societies.