Electric Vehicle Affordability Trends
The electric vehicle (EV) market has seen significant developments in affordability, driven primarily by falling battery prices, increased market competition, and manufacturers achieving economies of scale. In 2024, despite a slight increase in average battery size, global battery pack prices dropped by more than 25% compared to 2023 levels, leading to reduced electric car manufacturing costs.
Regional Variations in EV Affordability
China
- Rapid electrification across all car segments
- Nearly all small battery electric cars priced lower than average small ICE cars
- BEVs reached price parity with ICEVs in the SUV segment
- Average price premium of Extended Range Electric Vehicles (EREVs) remained at 60% over ICEV models
Europe
- Stagnating battery electric car prices due to carmakers’ pricing strategies
- Limited availability of cheap electric car models
- New EU CO2 standards expected to prompt release of more affordable models
- Nearly ten battery electric models priced under EUR 25,000 expected by end of 2026
United States
- Limited progress in battery electric car affordability
- Only 2 battery electric models priced below USD 30,000
- Average price premium of battery electric SUVs remained unchanged
- PHEV sales stagnant at 2% of total SUV sales
Emerging Markets
- Chinese models driving EV adoption through competitive pricing
- In Thailand, average price of Chinese EVs lower than conventional cars
- Significant reduction in price gap between BEVs and ICE cars in Brazil, Indonesia, and Mexico
Key Market Observations
- Battery Price Impact: The 25% drop in global battery pack prices in 2024 significantly influenced EV affordability.
- Regional Disparities: China led in EV affordability, while Europe and the US faced challenges with higher price premiums.
- Market Segmentation: Small cars in China were almost completely electrified (95% share) due to their affordability.
- Future Outlook: Expected release of more affordable models in Europe and the US to boost EV adoption.
- Emerging Markets: Chinese EV manufacturers played a crucial role in driving adoption through competitive pricing.
Conclusion
The EV market is witnessing a significant shift in affordability, particularly driven by falling battery prices and increased competition. While regions like China have made substantial progress, markets like Europe and the US continue to face challenges related to higher price premiums and limited availability of affordable models. The upcoming release of more affordable EV models is expected to be a key factor in broader market adoption.
