Hybrids & Electrics
Although electric cars save money on fuel costs, the hefty sticker price can be prohibitive for many consumers. So, when will EV prices drop?
Most shoppers know electric cars are more expensive than gas-powered ones. Although electric vehicles save money on fuel costs, hefty EV prices can be prohibitive for many consumers. So, when will electric cars get cheaper?
EV prices will likely go down in the next 5 years
Veteran automotive journalist Dan Neil recently participated in a Reddit AMA interview to answer user questions. Neil, who has written about vehicles for 20 years, has “driven and reviewed hundreds of cars and … written a lot about electrification,” he says.
One Redditor asked, “Dan, what’s your over/under on the year that fully electric vehicles will have a less expensive MSRP than comparable ICE [internal combustion engine] vehicles? What are the factors that would move the year forward or backward?”
Neil predicts electric cars will get cheaper around 2027.
“The auto industry is not looking at a whole new ballgame,” he explains. “Tesla has shown how to build better cars for much less and faster. Look at their profitability. Everybody else will have to catch up, and they will have to offer consumers a much better value than currently. But the price of personal automobility will fall significantly by 2030.”
Why are EVs so expensive, and how will they become cheaper?
The reason for high EV prices is that electric cars cost manufacturers more to produce than ICE vehicles. The battery is the most expensive component in an EV. In fact, the battery accounts for about half the overall cost of manufacturing the car. As batteries become cheaper to make, production costs will decrease, resulting in lower prices for car buyers.
That’s good news for consumers in the market for an electric vehicle in the next few years. EV prices will decrease due to the Inflation Reduction Act of 2022, signed by President Joe Biden. The act expands purchase incentives for new electric vehicles, and Section 45X funds 10 years of production credits for manufacturing battery cells, photovoltaic solar cells, and components for wind energy. That will help make batteries less expensive to produce, and buyers will see lower sticker prices.
Are electric vehicles more expensive to insure than ICE cars?
Another factor drivers must consider is car insurance. Consumers considering buying an electric car might wonder whether insuring an EV is more expensive than an ICE car.
According to Consumer Reports, many factors go into the cost of insurance premiums, and high-end EVs cost more to repair and might be more vulnerable to theft. That makes them more expensive to insure.
Lynne McChristian, director of the Office of Risk Management and Insurance Research at the University of Illinois, Urbana-Champaign, told Consumer Reports that the high cost is likely because insurers don’t have as much longstanding risk assessment data for EVs as they do for other vehicles, and that’s considered an uncertainty.
McChristian also said that compared to ICE cars, EVs are likelier to be declared a total loss after an accident due to the cost of battery replacement and have much higher repair costs.