Electric cars are everywhere thanks to their high sales, and their prices are getting close to those of combustion engines.
Global sales of electric vehicles (EV) more than doubled in 2023 compared to 2021, and this year, according to projections from the International Energy Agency, they will increase strongly again. If the forecasts are met, in 2024 we will have gone from just over 6 million to almost 17 million electric vehicles sold in just three years. In the European Union, and contrary to what is sometimes expected, less than a third of EVs were plug-in hybrids, meaning that the vast majority depended solely on their batteries to operate.
Another reason why we find more and more electric cars on the road is that, simply, we drive them more and more and resell them on the second-hand market. In the last two years, as updated figures from Our World in Data show, the number of electric vehicles in use has gone from just 26 million to well over 40 million worldwide.
Certainly, these figures must be put into perspective. The largest global increase has been seen—by far—in China, which helps to understand why the rapid takeoff in sales has not translated into a stampede of electric cars on the streets and roundabouts of New York, London, Paris, and Madrid.
This year, just over 10 million units could be sold in China compared to almost 3.5 million in Europe and less than 2 million in the United States. And these figures are also interesting because they remind us that electric mobility continues to depend heavily on public incentives, both for sales and production. China, a market heavily intervened by the state, has been the first in which EVs, on average, are already cheaper at the dealership than their rivals.
The first reason why the price of these vehicles has become attractive around the world is, therefore, the influence of public policies, which are committed, in this case, to reducing emissions. And these policies have translated not only into subsidies for sales and production, but also into the establishment of timeframes to ban the sale of non-electric vehicles, and laws excluding combustion cars from large urban areas. For example, the European Union has banned the sale of cars that emit CO2 from 2035.
Another reason for the attractive price of EVs is that the total cost of owning them for years is increasingly worth it. Unlike the final price consumers pay at the dealership, the total cost of ownership (TCO) includes subsidies, loss of value due to age and maintenance and fuel and insurance costs during the useful life of the vehicle. The TCO of electric vehicles has been converging for years with that of its rivals also in Europe and the United States, and the reasons are not difficult to understand.
To begin with, their energy consumption is more efficient, and their maintenance costs are lower. At the same time, the rate of depreciation is slowing down thanks to spectacular advances in batteries, growing consumer confidence in their autonomy and useful life (some batteries already have a range of 1,000 kilometers on a single charge) and, finally, the brand image of both electric models in general and certain brands specialized in their production, beyond the usual Tesla for the high end and Toyota for the medium, has been strengthened.
In 2022, according to the International Energy Agency, TCO parity between electric and combustion vehicles was achieved, on average, in less than seven years in Europe and the United States, always depending on sizes and models. So, from that moment on, electric cars became a better investment than their competition.
Another reason why the cost of electric cars has become so attractive is that more and more models have sharply reduced their retail price (without accounting for purchase subsidies) compared to their combustion rivals between 2018 and 2022.
And here the cases of SUVs have drawn powerful attention, which used to show an overwhelming price difference of 170% in the United States, 139% in the United Kingdom and 116% in France, which have now collapsed, respectively, to 56%, 51%, and 32%.
What was once a luxury product is no longer so luxurious and, in markets like China and Germany, the price differences stand at 10% and 21%. Furthermore, it must be remembered that all these figures do not include the discounts provided by public aid for the purchase of cars.
Even so, it is also true that on the average of all models, the differences remain important, and that in some countries (Germany) they have widened and in others (France) they have stagnated between 2018 and 2022. However, everything seems to indicate that the general trend is for the difference to narrow, as has happened in the United Kingdom, the United States, and China.
Another aspect to take into account is the brutal competition from the Asian giant, which is managing to sink the prices of EVs to the point that some mini models, such as the Wuling Bingo and the BYD Seagull, are already being sold nationally for about €10,000, taxes included. At these prices, and taking into account that Chinese automotive companies such as BYD, Cheri or SAIC are opening factories in Europe, the recent tightening of European tariffs could have a limited effect on the price attractiveness of the models at the dealership.
And all of this, in short, from the overwhelming Chinese competition to the advances in batteries, through subsidies and the increasingly close convergence between the TCO of combustion cars and electric cars, is going to translate, most likely, not only in even more attractive prices for electric vehicles, but in even greater sales.
What’s more, according to a recent BloombergNEF report, EV sales will rise from 13.9 million in 2023 to more than 30 million in 2027, growing at an average of 21% annually. Furthermore, the average share of these cars in global sales of new passenger vehicles would take off to 33% in 2027, compared to 17.8% last year, although only China (60%) and Europe (41%) would beat that mark by then. That said, within Europe some countries would advance even faster, according to BloombergNEF, with Scandinavian countries reaching 90% and Germany, the United Kingdom, and France well above 40% in just the next three years.
Text by Gonzalo Toca
