EVs will be cheaper to build than ICE cars by 2027, analyst says

Electric vehicles will be less expensive to build than internal combustion cars by 2027 thanks to new manufacturing techniques and lower battery costs, said Pedro Pacheco, vice president of research at technology analysis firm Gartner.

Battery costs are falling, but production costs will fall faster because of innovations like "gigacasting," in which large sections of the car are cast as a single piece, rather than using dozens of welds and bonding agents. Tesla, which Pacheco and other experts cite as the innovation leader in cutting assembly costs, has been a pioneer in gigacasting.

“Tesla and others have looked at manufacturing in a radical new way,” Pacheco told Automotive News Europe, a Rubber News sister publication, on March 6, ahead of the release of a new report from Gartner.

The rate of EV adoption has slowed in a number of key markets, including the U.S. and Europe, and experts say it will be crucial for auto makers to roll out lower-cost models. 

Pacheco said gigacasting alone can reduce the cost of the body in white by “at least” 20 percent. Other savings can come from using the battery pack as a structural element, he said. 

Battery costs have been falling for years, he said, but the drop in assembly costs are a “surprise factor” that will bring EVs to parity with ICE cars faster than thought, he said.

“We’re reaching this tipping point earlier than expected,” Pacheco said. Dedicated EV platforms have given auto makers the freedom to design assembly lines that are suited to their characteristics, including a smaller powertrain and flat battery floor. 

In contrast, “multienergy” platforms impose limitations because they need to be able to accommodate a gas tank or space for an engine/transmission, he said.

Whether and when these savings translate to lower showroom prices depends on the manufacturer, Pacheco said, although price parity between comparable electric and ICE models, on average, should be reached by 2027. 

Newcomers like BYD and Tesla can afford to cut prices because their costs are low enough to do so without hurting their bottom line too much, he said.

Gartner is still forecasting strong growth in EV sales, with half of all cars sold in 2030 being full electric. But Pacheco said the market was moving into a “survival of the fittest” period compared with an earlier “gold rush” for EV makers.

He described 2024 as a year of transition in the European EV market, with Chinese companies such as BYD and MG building up their sales networks and lineups, while legacy auto makers such as Renault and Stellantis will be launching lower-cost models.

“There are many things happening which might not necessarily impact sales, but they are preparing for something much bigger,” he said.

A number of high-profile EV startups have run into difficulties in the past year, including Nio, which continues to see huge losses; Polestar, whose share price has fallen sharply since going public; and Lucid, which cut its production forecast for 2024 by 90 percent. Others in difficulty include Fisker, which is in talks with Nissan, and HiPhi, which recently suspended operations for six months.

Gartner predicts that 15 percent of companies on the EV value chain that were founded in the last decade will fail, especially those that are dependent on continued outside investment to continue operations.

“We’re moving into a new phase where BEVs can’t sell on incentives or environmental benefits,” he said. “They have to be an all-around excellent product in comparison with an ICE.”