Why Are Electric Vehicles So Expensive

What does one see when looking at the market of serially produced electric cars? From Audi e-tron, Jaguar I-Pace, Tesla Model S and Model X to Nissan Leaf and Chevy Bolt, the price of the cheapest model starts at USD 35,000 and goes up to USD 200,000. Why are electric cars so expensive? Actually, the answer to this question is not as simple as it may seem at first glance. The reason is not just the price of lithium-ion batteries.

Big Investments

For more than 100 years, countless amounts of dollars have been spent on inventions and improvements of the traditional internal combustion engine (ICE), gearboxes and other components related to it. This is why, today, the engines that work with fossil fuels are so powerful and efficient. After all, thousands of the best world minds have worked on their improvements for more than a century. Things are quite different with electric cars. This technology is very young and expensive. The main reason for its development is the American company Tesla, and the rest, slowly but surely, follow it. They, however, invest huge resources in its development.

Small Volumes of Production

There are hundreds of factories in the world that produce tens of millions of internal combustion engines each year. Such mass production seriously reduces the costs for the production of new components for cars with ICE. For now, eclectic and lithium-ion-battery engines for electric cars are being produced in hundreds of times smaller volume.

Supply Chain

A well-functioning supply chain of raw materials from mining sites to processing plants, as well as of components to installation sites, has been created over these 100 years of mass production of ICE cars. Each manufacturer has an established connection between the pouring and stamping plants of the body panels and the companies producing engines, chassis, gearboxes, tires, oils and lubricants. Everything works like a Swiss watch, reducing the costs per unit. Part of these supply chains can also be used for electric cars. The problem with raw materials, however, is significant. Some minerals needed for the production of electric vehicles are either not yielded in large quantities, or their extraction takes place in problematic countries, such as Congo, Tanzania, Zambia, etc. The prices of these raw materials are rising periodically, the countries in question are blackmailing car manufacturers, which leads to money being lost and an increase in the production cost of this type of vehicles.

Repair and Service Do not Bring Much Profit

As we know, car manufacturers benefit from the sale of spare parts and the provision of car repair services. For example, the internal combustion engine consists of over 500 parts, and the high-speed transmissions and clutch systems are not among the most reliable components. In this case, the repair is quite profitable. Many car makers believe that electric cars are a “killer” of additional profits, which is a big problem. Unlike an internal combustion engine, the electric engine has a much larger resource as it consists of a smaller number of moving parts. The gearbox is replaced by a one-unit reduction gear. For this reason, when calculating the final price of electric cars, manufacturers calculate their losses from consumables, spare parts and services. Smart, isn’t it?

Some Electric Cars Are Expensive because They Are Premium

Some traditional cars, i.e. those with ICE are expensive because they are made for the rich. The same applies to electric cars. The price of the Tesla Model S P100DL (starting at USD 135,000) is so high because this car is luxurious.

When Will the Price Drop

Experts in the industry say that by 2024, the price of electric cars will be equal to that of ICE cars. After that, it will even begin to drop. They rely on the forecast by the US investment bank Morgan Stanley. Of course, due to various reasons, not all car manufacturers will be able to join the new, so desired by environmental experts, electric world. At present, 40% of the value of electric car comes from the lithium-ion battery. These batteries are 1.5-2.5 times more expensive than traditional car batteries. However, the cost per kilowatt hour decreases each year, though not as fast as we would like it to. Now, it is about USD 220-230 per kWh. Electric cars will be comparable in value with the ICE cars when their battery price drops to USD 125-150 per kWh. The Manager of Nissan’s Electric Vehicles Department, Nic Thomas, even claims that in five years, the price of batteries will drop below USD 100 per kWh, while stricter emission standards will affect the cost of cars with an internal combustion engine, which eventually will equal the prices.