The price of electric cars remains high despite a simpler design, who is to blame?
The automotive sector is also a world of paradoxes. While it is often admitted that an electric car is “simpler” to manufacture, and that the number of parts used in its composition is less important than in a thermal car, and that power is no longer really correlated to manufacturing cost, it remains even more expensive to purchase, for an equivalent range. Why this differential to the disadvantage of electric, when everything suggests that it should be the opposite? In fact, there are several reasons for this, and you will see that everything is not as simple as it seems.
A much lower number of parts on an electric one than on a thermal one
No need to draw a picture for yourself, it is now common knowledge that an electric car has many fewer parts – especially moving parts – than a thermal car. Exit the gearbox and all its dependencies (except on a few models which can still be counted on the fingers of Captain Hook's left hand), exit the clutch, exit the intake and exhaust systems, exit the tank of fuel, no more complicated transmissions between front engine and rear axle since generally the engine is an integral part of the transmission. This is to only talk about the visible and obvious part. But it is in the engine that the difference is most spectacular. Indeed, depending on the brand (and depending on the sources, which vary quite a bit on this point), an electric motor would only have around twenty moving parts, compared to 200 to… 2000 for a thermal engine. I admit that I didn't go and count, but that's what generally emerges from the data on the subject. In any case, that's the idea, and it's abysmal.
The cost of batteries remains a heavy weight on the scale
Therefore, one would indeed logically expect an electric car to cost less. Unfortunately, this is not yet the case. For what ? The answer to this apparent contradiction lies mainly in the central element of the EV:
the battery . Indeed, what we can consider as the heart of an electric car represents a significant part of the total production cost. Lithium-ion battery technology, while constantly evolving, remains expensive, particularly due to rare materials and complex manufacturing processes. Another factor to take into account is the
size of the battery , directly linked to the range of the vehicle. The greater the desired autonomy, the larger the battery and therefore the more expensive it is.
Okay, but what is the real impact of this on the cost of the car? Despite
a spectacular drop in kWh prices over the last 15 years , it is said that the battery still accounts for 40% of the total price of an electric car. However, the cost is expected to fall further over the coming years. According to a recent study by Goldmann Sachs, we have already seen a very slight drop in the price of the battery pack per kWh between 2022 and 2023. Over this period, the kWh lost on average 4 dollars, going from $153 to $149 . But the analysis is intended to be confident about a big drop to come between 2024 and 2026. According to this,
the price per kWh will reach around 110 dollars this year . Above all, the biggest prediction is a move below the $80 limit in 2026.
The impact of innovation and production
Another cost item is research and development. The development of EVs is still relatively recent, which means that
research and development costs are high and must be amortized over a lower number of vehicles produced than for thermal vehicles since the
scale of production of EVs is still limited compared to to gasoline vehicles, which impacts the unit manufacturing cost. The arrival of new players on the EV market, notably Chinese manufacturers, has made it possible to offer more affordable models. However, these vehicles are often positioned in the entry-level segment, with less sophisticated finishes and technologies than high-end EVs.
We must also take into account the costs linked to battery and energy management with the famous BMS – Battery Management System – synonymous with sleepless nights for many engineers in the sector, and of course all the costs linked to electronics and on-board computing, often considered more advanced, or in any case more crucial to the proper functioning of an electric vehicle.
In summary, lower hardware costs, but higher software costs.
Almost equivalent labor costs
We often hear that, thanks to a reduced number of components under the hood, electric vehicles require 30 to 40% less labor than thermal cars. However, the reality is more complex, and some researchers believe that these labor savings have been greatly overestimated.
According to
an analysis spotted on CNN , "People assume these estimates are correct," according to Turner Cotterman, a researcher who worked on a Carnegie Mellon University report and currently a partner at McKinsey & Company. “They are mainly based on the number of moving parts in an EV. As electric cars have fewer parts than thermal vehicles, it is concluded that they require less work to manufacture. » The researcher points out, however, that there is an erroneous assumption according to which there is a linear relationship between the number of parts and the labor required to produce them.
Erica Fuchs, also a Carnegie Mellon researcher and Turner Cotterman collaborator on this report, qualifies this idea: manufacturing the EV powertrain – including batteries, electric motors and energy management systems – actually requires more of work than that of the engines and transmissions of thermal cars.
Similar conclusions were made by the Boston Consulting Group, which found that the complete manufacturing of an electric vehicle, beyond its powertrain, requires in total only slightly less labor than a vehicle thermal: “If we compare an electric vehicle and an internal combustion vehicle equivalently, we observe a difference of only a few percent in the number of working hours required to manufacture them. »
This and other research reveals that the total labor difference between EVs and combustion cars is small. Gerald Johnson, executive vice president of manufacturing at General Motors, agrees in a video posted on the company's website about union negotiations: "Our own analyzes at General Motors, as well as other studies, confirm that the workforce required for the production of electric vehicles will be very similar to those required today for an equivalent thermal vehicle. »
Are manufacturers protecting their margins excessively?
This is a subject less discussed when we talk about the electric car ecosystem, and yet certain indications suggest that it also weighs in the balance. Manufacturers, whether European, American or Chinese, have in recent years attacked the EV market from above, and therefore from the top of the range. Everyone says it and complains about it: electric cars are – still – too expensive, and the market is still cruelly lacking in
small, versatile city cars for less than 20,000 euros . Proof that manufacturers still have it under their belt when it comes to margins? Look at how some are able to collect new penalties of several thousand euros without this having the slightest impact on their public prices...
The Big Evening for 2027?
Despite this data, experts agree that
the cost of producing EVs is constantly decreasing . Increasing demand, improving battery technologies and optimizing manufacturing processes are expected to help make EVs more accessible in the years to come. Concretely, the Gartner firm is banking
in its latest study released in March 2024 on
a tipping point in 2027 , the year when the construction of an electric car would become less expensive than that of a thermal car, a new situation which should in all likelihood be reflected in sales prices.
If we add to this data a total cost of ownership and use more favorable to electric, and reasonably optimistic forecasts for 2025, we say that the planets are perhaps aligning again ?