Costs of electric vehicles: A study in Germany

The mobility of individuals is a cornerstone of modern society and vital for the functioning of developed economies worldwide. However, as the effects of global warming become increasingly evident, it is clear that the current global mobility system reliant on fossil fuels is unsustainable. what is the Costs of electric vehicles: A study in Germany highlights the importance of transitioning to cleaner alternatives, especially since the transport sector contributes nearly a quarter of global CO2 emissions.

Of these almost half are accounted for by passenger cars According to the International Energy Agency global transport in passenger is expected to double by 2070, and car ownership is expected to increase by 20% and another 60% , This trend, coupled with a sharp increase in aviation and ship traffic, will inevitably lead to a sustained increase in CO2 emissions. To ensure that economic development in high-growth regions does not slow down, the growing need for mobility must be decoupled from fossil fuels

With high conversion efficiency and zero emissions from tank to wheel, battery electric vehicles (Bevs) are considered key levers for the transition to a more sustainable transportation system In Germany, with the introduction of direct purchase subsidies in 2020 of up to 9,000 euros, sales of BEVs and plug-in hybrids increased by more than 200% year-on-year, bringing the total market share to almost 13% .

But at a global level, BEV sales remain marginal. For electric vehicles to make a significant contribution to reducing oil consumption in the transportation sector, the share of passenger car sales must increase significantly by the end of the current decade .

As electric vehicle technology continues to evolve, there is a broad consensus that the cost of buying and owning a BEV will continue to be a major obstacle to the wider adoption of electric vehicles . Therefore, predicting the future price of a Bev compared to conventional cars has become the focus of extensive academic and commercial research work.

The transition seems to be accelerating while manufacturers strive to electrify their fleets to meet emissions standards enforced in the European Union and other key markets.In recent years, a large number of newly developed Bevs from different manufacturers have been put on the market, and the price of the mid-range segment has risen to a level that was expected to reach much later in 10 years .

Many previous assessments of the cost development of BEVs have become obsolete. Bloomberg New Energy Finance (BNEF) had expected price parity for certain market segments to occur in 2020 as early as 2022 , but another consulting firm concluded in the same year that it would not reach the price of conventional cars in the mass market segment by the end of 10 years . A closer look at these publications shows that most of the variance between studies is based on different underlying techno-economic assumptions, and the details of which are not always available to readers. Most of the previous publications have been based on proxy data such as data-intensive bottom-up cost forecasts or lower prices for hybrid vehicles , the influx of new BEV models across the analysis of all vehicle segments provides a wealth of additional data points that in recent years open up new opportunities for empirical analysis.

Therefore the purpose of this project is to use this additional price data in combination with an established approach to top-down BEV price forecasting to provide price forecasting with higher reliability than previously possible. In addition, it will conduct current and future total cost of ownership (TCO) analysis of electric and conventional vehicles to complement the overall picture of the cost of BEVs for consumers with price forecasts.

The results of this study may help to add certain nuances to the ongoing cost parity debate.If the observed learning rate continues, cost-effective electric vehicles will soon be available in the luxury and mid-range segments. For small cars, the observed price trends indicate that it will take more time for the Bev to be competitive in this market segment. In short, this means that the cheaper the gasoline car, the longer it will take to equip the Bev with an equivalent vehicle

The study conducted a learning rate analysis of the retail price of electric vehicles in Germany between 2015 and 2020 to predict the purchase price parity between electric vehicles and comparable conventional vehicles in various market segments. We saw a learning rate of 23% for small cars. For mid-range cars, the cost reduction rate was 29%. A learning rate of 24% was observed in the luxury segment. Based on these results, it was decided that luxury BEVs will achieve price parity by 2023 and medium-sized cars will achieve price parity by 2026. For small cars, the results show that price parity will not be achieved by 2030.

The result of price parity is complemented by an assessment of the current and future total cost of ownership of electric and conventional vehicles. The analysis showed that medium- and large-sized electric vehicles were already at roughly the same price as traditional cars by 2020, even before the federal government subsidized them. However, large subsidies for small electric vehicles were still needed to remain competitive. The sensitivity of the analysis results to certain key parameters was assessed, including standard errors in learning rates, global BEV production expected in the coming years, the cost of conventional powertrain, and the impact of government subsidies on operating costs and vehicle ownership duration. Overall, the cost gap for large vehicles will close around the middle of the decade, but it shows that a high percentage of technological innovation is needed to make small Bevs cost-competitive with petrol vehicles before 2030.