EVs Set to Become More Affordable Than Gas Cars Soon
For years, a key obstacle to wider adoption of electric vehicles (EVs) has been their higher price tag compared to gasoline-powered cars. However, this is set to change with the continued decline in lithium-ion battery costs and rapid technology advancements. According to industry estimates, EVs are projected to reach a total cost of ownership breakeven point, and even become cheaper than traditional cars, as soon as next year.
Currently, there is a price gap between new EVs and gas cars. For instance, in June 2024, gas-powered cars in the U.S. had an average transaction price of $48,644, while new EVs averaged $56,371, according to Kelley Blue Book. That’s a difference of nearly $8,000. But the future looks brighter for EVs.
The cost of lithium batteries has been plummeting. From 2008 to 2023, the price of a light-duty EV’s lithium-ion battery pack fell by 90%. The Department of Energy (DOE) reports the cost dropped from $1,415 per kilowatt-hour (kWh) to a more reasonable $139/kWh during that period. Goldman Sachs anticipates a further 40% reduction in battery prices between 2023 and 2025, which will result in more affordable EVs capable of undercutting the price of gasoline cars while also generating profits for manufacturers.
While battery costs constitute a major portion of the total vehicle cost, they are not the sole determining factor. Other variables are also relevant. Some automakers depend on attractive financing and leasing deals. These offers help in lowering monthly payments, making EVs more accessible.
Taking government incentives into account is also important for understanding the actual cost of owning an EV. Federal tax credits, like the $7,500 credit, can be applied to lease agreements as well, sometimes making an EV more cost-effective than a gas-powered car, despite a higher sticker price.
