That’s according to a report from research firm Bloomberg New Energy Finance, which posits that in just six years, the biggest obstacle to the sale of EVs—they cost too much—will be obliterated and cars that run on electricity will cost less than those that run on dead dinosaurs.
“By 2022,” the report says, “the unsubsidized total cost of ownership of BEVs [battery electric vehicles] will fall below that of an internal combustion engine vehicle.” From there, the report projects a steadily increasing rate of adoption, reaching global sales of 41 million—25 percent of total market share—by 2040.
That’s a remarkable prediction given that today, EVs make up less than 1 percent of new car sales in the US. Government subsidies and mandates are largely responsible for what consumer interest and R&D investment we’ve seen so far. For the technology to go mainstream in the way Bloomberg predicts, the industry must address the biggest impediment to adoption: EVs simply cost too much. It’s a BFD that General Motors managed to develop a car, the Chevy Bolt. That’s just below the average price of a new car in the US, meaning there’s a lot of room for improvement.
Change is coming, according to the Bloomberg report. “We project that the cost of manufacturing electric vehicles will fall dramatically, and faster than most people realize,” says Salim Morsy, the author of the study.
The key to that trend, Morsy argues, is the battery pack that powers the car. The pack can account for about a third of the cost of the entire vehicle. Between 2010 and 2015, the average cost per kilowatt hour (kWh) dropped from $1,000 to $350—a 65 percent plunge. (Today’s EVs have packs ranging from 30 kWh in the new Nissan Leaf to 90 kWh in the Tesla Model X.)
Continuing that trend doesn’t rely on any big breakthroughs in battery tech. Instead, it’s based on moderate improvements in production processes and battery chemistry, economies of scale as manufacturing expands, and “aggressive pricing” by producers eager to sign contracts with major automakers. “We believe that between now and 2020, cost will continue to drop significantly,” Morsy says.
The rate of change will slow, sure, but prices could reach $200/kWh by 2022, and $120/kWh by 2030. Meanwhile, GM says it’s already paying just $145/kWh for the batteries powering the Bolt. Bloomberg can’t verify that figure, but the imminent arrival of cars like the Bolt and similarly affordable Tesla Model 3, Morsy says, is “a material testament to the fact that we’re rapidly approaching cost parity.” The fact that the auto industry is slowly moving toward a world in which people don’t own cars could limit total vehicle sales, Morsy believes, but shouldn’t impact the growing ratio of electric cars in the market.
A Few Words of Caution
There are some caveats here. First, longterm EV adoption projections rely on the reasonable assumption that by 2030, customers will have access to a well-developed and beyond the one they’ll use most often—the plug in the garage.
Second, Bloomberg’s study relies on the idea that government subsidies that are keeping the EV market alive and pushing automakers to invest in the technology, aren’t about to disappear. In the US, that’s a $7,500 federal tax credit for buying an EV, tax breaks on home chargers, and various state incentives, including access to carpool lanes on congested highways. European countries offer a mix of tax breaks and “bonus payments,” and China uses mandates to encourage the sale of electrics. The American support of electrics may soon come under attack, considering to kill those subsidies in the US.
And third, the total cost of ownership comparison is based on the expectation that oil prices will sit between $50 and $70 per barrel, meaning today’s crazy low prices—about $32 a barrel—have to head north again. Of course, it’s inevitable that they will.
The biggest reason for concern, though, is that even if EVs match gas-powered cars in total cost of ownership, it might not be enough for a revolution. “Way too much is put on that,” says EV advocate Chelsea Sexton. The 2022 date sounds about right, she says, but if consumers are going to switch to EVs, popular thinking needs to change, because car buying isn’t a rational process. If it were, she says, “we’d all be driving white Honda Civics.”
To make that happen, despite the lower cost of maintenance that takes away potential revenue. Automakers must market their electric offerings as vigorously as their gasoline-drinking vehicles. And they have to build enough of the things to meet the demand they could generate.
Tony Posawatz, the engineer who led the development of the Chevrolet Volt, briefly led Fisker Automotive, and is now an industry consultant, says there’s nothing too surprising in the report. The 2022 timeframe is “certainly within the realm of possibility,” he says, as long as charging infrastructure continues to roll out. “If that is not better developed, that could limit the 2022 knee in the curve.”
So why doesn’t the report call for a faster advance of electric cars, once they cost the same as the gas guzzlers we’ve been stuck with for a century? Because big infrastructural changes move slowly. Posawatz points out it took 50 years for half of American households to hook up to the electricity grid. Good things are happening with EVs, he says, but “it’s a long haul.”
