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Report: EV Production Cost Parity a Decade Away

EV production costs are falling, but ICE costs are rising.
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Making small electric cars in Europe will cost more than building piston-powered vehicles for at least another 10 years.

The problem—no surprise—is the cost of the battery, says New York City-based consultancy Oliver Wyman in an analysis for the London-based Financial Times.

GM’s Ultium battery  (Image: GM)

Chasing Lower Costs

The report says total average EV production costs will drop 20% to $19,100 by 2030.

That amount will still be 9% greater than the cost to build a comparable diesel or gasoline vehicle. The analysis predicts EVs will become cheaper than combustion-powered vehicles “not far beyond 2030,” the newspaper reports.

But that doesn’t mean ICE costs by then will be what they are now.

Other analyses have pointed out that the technologies needed to meet future emission limits will add cost to ICE-based vehicles over the next several years. At the same time, FT reports, carmakers will be focusing most of their cost-cutting efforts on EVs rather than legacy products.

Profit Squeeze

The report warns that the squeeze will narrow profit margins for both types of products in the future compared with historical norms for combustion-powered vehicles.

The report estimates that the cost of a 50-kWh battery will drop to about $5,100 by 2030 from $9,600 today, thanks to higher-volume production and greater competition among battery suppliers. Costs could shrink further as solid-state batteries supersede current lithium-ion chemistries.

The cost of transitioning to electrics will continue to strain product development budgets, according to the report. FT says the pressure will push carmakers to rely more on sub-tier suppliers, notably tier-3 providers of such items as semiconductors and battery minerals.

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