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Electric Vehicle Prices Fall as Battery Technology Improves

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declining battery costs drive down the electric vehicles prices

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The Briefing

  • Declining electric vehicle (EV) battery costs are driving production costs down
  • At the battery pack price point of $100/kWh, electric vehicles will become as cheap to make as gas-powered cars

Electric Vehicle Prices Fall as EV Battery Tech Improves

Electric vehicles (EVs) only accounted for around 3.2% of global car sales in 2020—a figure that’s set to grow in the coming decade, largely due to falling EV battery costs.

With rising production and technological improvements, batteries are becoming cheaper to produce, making EVs increasingly competitive with gas-powered cars.

Wright’s Law is Right So Far

According to Wright’s Law, also known as the learning curve effect, lithium-ion (Li-ion) battery cell costs fall by 28% for every cumulative doubling of units produced.

Wright’s Law has accurately predicted the decline in battery costs and so far, reported battery prices have been in line with modeled forecasts. The battery pack is the most expensive part of an electric vehicle. Consequently, the sticker prices of EVs fall with declining battery costs.

By 2023, the cost of Li-ion batteries is expected to fall to around $100/kWh—the price point at which EVs are as cheap to make as gas-powered cars.

YearPrice of Toyota Camry ⛽️Price of a 350-mile Range EV 🔋
2019$24,000$50,000
2021$25,000$39,000
2023$26,000$26,000
2025$26,000$18,000

Figures represent the Manufacturer Suggested Retail Price (MSRP)

EVs are already cheaper to own and operate than comparable gas-powered cars due to savings from gas, maintenance, and resale value. Therefore, a reduction in retail electric vehicle prices may enable them to compete more directly with gas-powered cars.

According to ARK Invest, the manufacturer’s suggested retail price (MSRP) of a 350-mile range EV will be on par with that of a like-for-like Toyota Camry in 2023. Furthermore, the price of a 350-mile range EV is projected to drop by 53% between 2021-2025—making it $8,000 cheaper than the Camry.

The Electric Catch Up

Electric vehicles are a key piece of the puzzle in the transition to clean energy. Hence, growing consumer awareness around climate change is a catalyst for the EV space.

However, as EV production increases, so does the need for various critical minerals, charging infrastructure, and more. Price is just one of the hurdles that EV manufacturers need to overcome on the road to mainstream EV adoption.

Where does this data come from?

Source: Ark Investment Management – Big Ideas 2021 Report

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