EVs not far from achieving cost parity

TRAVERSE CITY, Mich.—The electric vehicle evolution has begun. OEMs are making them. Consumers appear to want them.

But are they affordable enough for new car buyers to take the leap from internal combustion engines?

More importantly, how soon can EV-ICE cost parity be achieved?

Stephanie Searle, director of the fuels program and the U.S. region for the non-profit International Council on Clean Transportation, believes there are two different answers to the latter question. And the timeline for EVs achieving cost parity with ICE vehicles on both purchase cost and lifetime ownership are very different.

Vehicle sales prices have risen by about $10,000 since the start of the pandemic, according to Cox Automotive data. And that upswing is pricing many middle-income buyers from the new vehicle market. Add to that newly rolled out, more expensive technology of electrification and that pushes new vehicle prices higher.

The Biden administration, in laying out its vision for a transition to electric vehicles, tried to tackle this issue in the planning phases.

Auto makers, likewise, are trying to keep purchase costs reasonable, according to Jonathan Weinberger, General Motors' chief advocate and director of global transportation technology policy.

"We want to make the accessibility of EVs as easy as possible, too," Weinberger said. "We have two EVs—the Bolt and the Bolt EUV—that are sub $30,000. The Equinox is another one. The average price of a car is about $45,000 so we want to be below that. We want them to be accessible."

For the most part, though, consumers are going to pay more for an electric vehicle—particularly in the highly sought after SUV and pickup segments.

"Right now, if you look across the whole industry—at the models available in the U.S.—and compare as much as you can apples to apples—a compact car to a compact car, a pickup to a pickup—the electric models tend to be a little bit more expensive," Searle said.

The good news is that, as auto makers transition production to ramp up the manufacturing of electrified models, the cost of a new electric vehicle is likely to come down—or at least begin to match the cost of new a vehicle with an internal combustion engine.

In fact, Searle said, give it just about 10 years.

"We expect to reach purchase cost parity—(where it is) cheaper to buy an electric model—come before the end of the decade for cars and a few years later for SUVs and pickups," Searle said.

But there is far more to an EV's cost than MRSP. There are advantages to ownership, particularly on the financial side, that play out over time.

So far, the biggest advantages seem to be coming from fuel savings. And that could outweigh the up-front costs, Searle said.

"Some of that gap is closed when we consider the savings in fuel costs," Searle said. "Charging, overall, is typically cheaper than buying gasoline, even if we consider that consumers are going to be charging some of the time at more expensive fast chargers."

In fact, those savings—combined with the savings from less frequent maintenance costs—already are helping to level the playing field long term.

"Looking ahead, we see total cost of ownership parity," Searle said. "We expect cost parity to come in the next few years. At least for cars first, and then for SUVs and pickups later."

At this point, it's up to the industry to really convey that message.

Weinberger said the Detroit-based auto maker is doing what it can to help spur cost savings, but admits that auto makers can't do it alone. They need to be supported by policy and investment, he said, because incentivizing ownership of EVs and making investments in infrastructure to ensure charging is more readily available will help to push EV sales even further.

"We have a program for home charging," Weinberger said. "We want to make it as easy as possible. … We have to have the home charging, but we also have to have the trip planning charging. They're both critical and we need policy help from the government to do that."