Price parity between electric and combustion vehicles may still be a few years off, but two of Canada’s top-selling EVs just got cheaper — a trend BNEF analyst Corey Cantor says we can start getting used to
Maybe it was late-summer ennui or election distraction, but when Nissan Canada announced that it had cut nearly $7,000 off the price of its 2022 Leaf EV in late August — touting greater buyer accessibility and value — you might have expected more fanfare.
The same week, Hyundai chopped nearly 10 per cent — or US$3,390 — off the price of the 2022 Kona Electric in the U.S. In Canada, the reduction on a Kona EV versus 2021 is just 3 per cent. But it’s cheaper, nonetheless.
For years, falling battery prices have pointed to a fuzzy future date when EVs will be as cheap to make as comparable combustion vehicles. When that point is reached, automakers and analysts expect a rapid surge in EV sales.
Seeing these latest price cuts prompts the question, is that future arriving now?
Almost, but not quite, says Corey Cantor, electric vehicle analyst with BloombergNEF in New York. Price cuts such as these likely have more to do with marketing, he says. But even so, he expects we will start to see price parity in some EVs as early as 2023.
Large vehicles to lead
“Different automakers can be ahead of what we’re expecting if they have low enough cost internally, but for the U.S. — and Canada should be similar — we see 2023 as the beginning of that up-front price parity point for large and SUV [vehicle] segments,” says Cantor, in an exclusive interview with Electric Autonomy Canada.
For medium and small vehicles in the U.S., BNEF says it will take until 2024 for parity to start to kick in. In Europe and China, BNEF expects the window to open a bit more gradually, also starting in 2023 but extending to 2027 or 2028.
“It’s all moving in the direction where you’re going to see EVs and ICE on the same playing field, and then even more improvement on the EV side as batteries get more and more efficient,” says Cantor.
Parity will arrive in larger vehicles earlier because they’re more expensive across the board, Cantor explains. “As the battery comes down in cost, [EV versions] are better able to compete with those already expensive premium models.”
Battery price forecast
BNEF publishes its pricing forecasts in its annual Electric Vehicle Outlook, which came out this year in June. However, as battery-price declines are the key to those forecasts, then next clear signal we’ll get from its research will be in late November, when its latest battery price survey will be released.
Last year, BNEF pegged the average EV maker’s battery cost at US$137 per kilowatt hour. According to most conventional wisdom, that price needs to fall to US$100 per kWh to achieve vehicle price parity.
Because BNEF’s figure is an average, some individual carmakers are already lower. Tesla’s cost in 2020, for example, was approximately US$115 per kWh, according to BNEF. Recently, GM said the per-kWh battery pack cost in its new Ultium system will be close to US$100.
The degree to which car buyers will demand EVs with more range also adds some uncertainty. Achieving higher ranges typically requires bigger batteries and heavier vehicles, which might mean parity won’t be reached until battery price-performance goes under US$100 per kilowatt hour.
“We’ll see as more EVs come online,” says Cantor. “There will be some flexibility. I don’t think range is going to just continue to go up and up forever. There’s trade-offs between price and long range.”