Summary
- EV prices have fallen by 25% since 2018
- In 2023, the price difference between EVs and combustion cars in the U.S. reduced to 15%
- EVs are still more expensive in the U.S. and Europe compared to China
- China has cheaper EVs, with vehicles costing up to 101% more in the U.S.
- Factors contributing to the narrowing price gap include increased regulation and improved affordability of EVs
Article
The falling price of Electric Vehicles: A Comparative Analysis
Electric vehicles have historically been significantly more expensive than combustion cars. However, recent data from Jato Dynamics suggests that the average price of an EV has fallen by 25% since 2018. This decline in price is attributed to the decreasing costs of batteries and the introduction of newer, less expensive electric vehicle models in the market. In the United States, the average EV price was $55,000 in December 2024, only 12% higher than the average price of a gas-powered car. The increasing affordability of EVs is closing the price gap between electric and combustion vehicles.
Global Trends in Electric Vehicle Pricing
While the price of electric vehicles is decreasing in the United States, Europe, and China, disparities still exist. In the U.S., the price difference between EVs and ICE vehicles decreased from 50% in 2021 to 15% in 2023. In Europe, the price gap was 27% in 2023, increased to 29% in 2022, before falling to 22% in 2024. Conversely, EV prices in China are significantly lower, with the average price of a new EV in the country being $33,400 in the first half of 2022, compared to $58,600 in the European Union and $67,000 in the United States.
China’s Dominance in Affordable Electric Vehicles
China has emerged as a leader in affordable electric vehicles, with EVs being considerably cheaper in China compared to Europe or the United States. The average price gap between China, Europe, and the U.S. continued to widen, with EVs in Europe and the U.S. being 115% and 118% more expensive, respectively, in the first half of 2023. China’s accelerated adoption of EVs can be attributed to a wider choice of affordable models. Nearly 80% of all EVs bought in China in H1 2023 cost under $42,000, with a third priced under $21,000.
Factors Driving the Price Gap
Felipe Munoz, Global Analyst at Jato Dynamics, attributes the narrowing of the price gap between EVs and ICE vehicles to various factors. While carmakers have improved the quality and affordability of electric offerings, stricter regulations, higher standards, and the introduction of advanced features have contributed to the rising prices of ICE vehicles. On the other hand, lower battery costs have led to a decline in BEV prices. The price of EVs in the U.S. was $56,520 in July 2024, compared to $48,401 for ICE vehicles, reflecting a 16.8% difference.
The Evolution of EV Pricing
Kelley Blue Book reported that the average price difference between EVs and ICE vehicles decreased from 53% in 2018 to 15% in 2024. In the same period, the price of electric vehicles experienced an 11% decrease, while ICE vehicle prices rose by 14% on average. Despite the overall price reduction of EVs, the cost of combustion vehicles has continued to increase due to various external factors. As a result, the affordability and competitive pricing of electric vehicles are becoming more prominent in the automotive market.
Conclusion
The falling price of electric vehicles signifies an important shift in the automotive industry. The increasing affordability of EVs, driven by factors such as declining battery costs and the introduction of less expensive models, is narrowing the price gap between electric vehicles and combustion cars. While EVs remain more expensive than their ICE counterparts in Europe and the U.S., China stands out as a market leader in affordable electric vehicles. As carmakers continue to improve the quality and affordability of electric offerings, the future of electric vehicles looks promising, with a potential to revolutionize the global automotive industry.
Read the full article here
