Why are electric cars so expensive?


Martin Gurdon

3.10.2022

Why are electric cars so expensive, and when will they become more affordable? These are questions Electrifying.com readers frequently ask, and Professor Peter Wells is a good person to supply some of the answers. He’s Cardiff Business School’s Centre for Automotive Industry Research director, so has a good a handle on battery electric vehicle future trends.

Ask him why electric vehicles generally cost more to buy than their petrol or diesel equivalents, and he’ll suggest a number of reasons.“EVs are not as far down the development curve as petrol or diesel cars, which have had 100 plus years to perfect the technology. They’ve had a good run,” he said.

Although electric cars have been around for as long as internal combustion engined ones, Professor Wells said that it’s only recently that there has been a commercial impetus to develop the technology that makes them work. 

“Developing battery chemistry technology has only been an area of interest for the past 10-15 years, and there’s a lot more innovation to come. So, electric cars are not as well developed (as ICE models), but that means there’s a lot more room for improvement in the years ahead,” he said.

Battery electric cars are developing fast, with drastic change in the last 15 years

He concedes that as more batteries are made, so their costs have fallen dramatically, by up to 90% in around a decade he thinks. But the batteries themselves have generally become more powerful and bigger. He namechecks the pioneering Nissan Leaf, which appeared in 2011, with a 24kW battery pack, but today it has up to 70kW on tap, which Professor Wells describes as a near industry standard for many electric vehicles. Bigger batteries cost more than smaller ones because they use more raw materials.

Other development costs remain greater than those for conventional cars, which essentially take long-established components and refine with, and according to the professor, “there’s still a lot work on which materials go into battery packs, and how those battery packs go into the vehicles.”

One popular design idea, as favoured by Tesla, is what the professor calls ‘a tea tray chassis,’ where batteries form part of the passenger cabin floor, providing something flat and giving cars a low centre of gravity. Designing these things from scratch costs money and there are other engineering solutions under development too, where the batteries actually become part of a car’s structure.

Tesla Gigafactory Berlin robot on production line Tesla will build batteries into the structure of the car

Professor Wells thinks in the long term engineering from the ground up is a good thing, rather than adapting ICE underpinnings, which some car makers have done, but it’s a more expensive way to do things in the short term.

As the number of new electric vehicles increases and car producers get better at making them costs are likely to fall. Vehicle manufacturers also like to re-use the same bits in as many different models as possible, as the more you make something, the cheaper it gets, and this economy of scale will impact the price of electric cars. Professor Wells mentions the VW Group as a good example. He said Volkswagen, Audi, SEAT, Skoda and even Bentley will all use a few variations of standard basic battery types, and you can bet the likes of Mercedes, BMW et al will have similar strategies.

He does suggest that the current proliferation of models, trim levels and derivatives will shrink, because offering a massive range of choices is expensive. This would lead to fewer, possibly cheaper cars with greater scope for personalisation, he reckons.

The professor doesn’t think there are many cost disadvantages when it comes to actually making EVs. Although he concedes that new factories are often needed to make motors and batteries, EVs have fewer moving parts, and in some ways are sometimes simpler to build than internal combustion engined models.

Modern car factories, with their lines of robots, already build a variety of vehicles, so adding EVs to the mix doesn’t create a vast, expensive headache, and when new models are launched, however they’re powered, millions are spent anyway on development, said professor Wells.

VW is a master of making different variations of the same car

He thinks the sort of models we’re being offered isn’t helping their affordability. “There are a lot of big, heavy SUV battery electrics, and we’re not seeing enough choice at the smaller end of the market. The Hyundai Ioniq 5 is a lovely car, but it’s big, heavy, uses a lot of materials and costs £50,000.” Professor Wells would like to see more cars like the small and simple Citroen Ami (and now Oli) to redress the balance.

The professor thinks vehicle makers can’t meet demand for electric cars because the supply of materials such as cobalt ‘is really tight,’ and this is holding back sales volumes that would make these cars cheaper to build. “Daimler Trucks is looking at ion phosphate batteries because of the massive demand for cobalt and lithium. There would be a slight performance reduction but the batteries would use cheaper and more readily available material. The scramble for resources is impacting on design choices,” he said.

He also wonders whether owning a car outright will be a thing of the past in a few years because of battery re-cycling issues. “We don’t really have enough solutions for re-cycling battery packs. Some companies like VW are looking at retaining the ownership of battery packs for their entire life cycles. They wouldn’t just disappear into the used market. VW would keep ownership (of batteries) for four lease cycles then take vehicles back for re-cycling. It would change the way the industry works,” he said.He thinks this would give manufacturers more leverage over pricing. “They want to control warranties, insurance and finance. There’s a lot of money to be made from the vehicles themselves. The EV market provides an opportunity to leverage it.”

So, what does the future hold for electric car buyers?“Electric vehicles will become cheaper overall,” is the professor’s prediction, although external factors, such as taxation will play a part here, and he castigates successive UK governments for a benefit in kind taxation system that favours company car drivers and is frequently tweaked and amended. Professor Wells commends EV-friendly Norway for having “absolute stability on these issues.”  In any event, he thinks UK car buyers “should push the purchase price out of their minds,” when comparing electric with conventional cars, as the electric option will often be cheaper overall. “Unless you do 40,000 miles on motorways an EV is a very good option.” And what does Professor Wells drive? A Nissan Leaf.

Cars like the Citroen Oli will help grow the market

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