EVs Will Be More Affordable Than ICE Cars by 2032 in the U.S., Study Claims

Average EVs' prices will fall 25% 6 photos
Photo: Pexels, Freepik
Tax credits will help driving down EVs' pricesTotal cost of ownership for EV will be the lowestDifferent scearios for EVs sale shareBattery pack's prices will slash in halfIRA will boost electric vehicles sales
The International Council on Clean Transportation is analyzing the impact of the Inflation Reduction Act on the electric vehicles market. ICCT expects sales growth and falling prices, so let’s take a look at the next ten years’ scenario.
Road transportation is responsible for almost a quarter of total U.S. greenhouse gas emissions. In cities, more than half of the harmful pollutants affecting our health also come from internal combustion engine vehicles.

There are about 250 million light-duty passenger cars powered by ICEs. And don’t forget other tens of millions of heavy-duty trucks, buses, and other large vehicles on wheels that also use large combustion engines.

Replacing as many ICE vehicles as possible with zero-emission ones is the fastest way to curb emissions. That’s why the 2022 IRA consists of tax credits for new and used EVs, as well as domestic supply-chain incentives for EV manufacturing and battery production.

A multi-billion effort over a decade

The Biden administration’s goal is a 50 percent EVs share for passenger vehicle sales in 2030. To make this happen, the IRA’s $370 billion (€345 billion) budget is providing a Personal Tax Credit of up to $7,500 (€7,000) for Clean Passenger Vehicles.

It's the same value as before. But now the manufacturer’s 200,000 units sales cap is no longer in force. Instead, there are some battery requirements, as follows: $3,750 is for meeting critical mineral requirements, and $3,750 is for meeting certain component requirements.

IRA will boost electric vehicles sales
Photo: Ford
There are also MSRP price caps for cars to be eligible for the tax credit. For instance, sedans costing more than $55,000 (€51,300) don’t benefit from the IRA tax credit, while SUVs and pickup trucks must cost less than $80,000 (€74,600).

Recent data from the National Highway Traffic Safety Administration shows that the U.S. light-duty vehicle fleet is grouped into types of cars as follows:

  • 27% cars (mainly sedans)
  • 35% crossovers
  • 23% SUVs
  • 15% pickup trucks

There are already issues with the classification of some models, especially in the crossover area. But the analysis estimates that 87% of new electric cars will meet the MSRP requirements. We may also see more carmakers favoring smaller electric cars, but with a bigger range, as larger batteries are the costliest part of an EV.

IRA also supports battery manufacturing with an Advanced Manufacturing Production Tax Credit worth up to $45 (€42) per kilowatt-hour. This will help drive down fast-paced battery prices. Projections for a 50 kWh battery pack in this analysis are as follows:

  • in 2022 – $131/kWh (€122/kWh)
  • in 2025 – $105/kWh (€98/kWh)
  • in 2030 – $74/kWh (€69/kWh)
  • in 2035 – $63/kWh (€58/kWh)

A slash in half of the battery-pack cost over a decade is a big driver for electric cars becoming more affordable and thus increasing their share in total vehicle sales.

Are EVs going to be affordable for real? Not quite

ICCT study suggests that by 2032 the purchase costs for electric cars will be reduced by $3,400 to $9,050 (€3,170 to €8,440) thanks to the tax credits. EVs won’t be much more affordable than today. But they will have a big advantage thanks to a better total cost of ownership (TCO).

The average price for battery electric vehicles in the U.S. was $40,300 (€37,500) in 2022, the study shows. Although currently there are EVs priced at almost half this value on the market, most customers favor long-range electric cars and larger electric SUVs, with sticker prices of more than $50,000 (€46,600).

ICCT forecasts that, by 2030, the average price for an EV will come down to about $30,800 (€28,700). That’s a 25 percent cut in less than ten years, which is encouraging, albeit not quite affordable. But we need to put things into context.

Tax credits will help driving down EVs' prices
Photo: ICCT
The average price for an ICE vehicle will see a small increase from about $32,000 (€29,800) in 2022 to some $33,100 (€30,800) by 2030. The plug-in hybrids will remain the highest-priced because of having both the combustion and electric powertrain: from about $38,600 (€36,000) in 2022, they will go down to about $37,000 (€34,500).

The TCO calculation is very interesting. The average electric vehicle ownership is expected to fall from about $8,000 (€7,500) in 2022 to $5,500 (€5,100) in 2030. It’s a 31% decline in costs. And it comes with much less range anxiety due to better range and faster charging.

A comparison of the six-year cost of ownership between electric, plug-in hybrids, and internal combustion engine vehicles shows that by 2030 the EV will have the edge over the other two powertrain types.

Based on all these estimations, electric vehicles will reach price parity with gasoline vehicles around the 2027–2028 timeframe. But there are other factors that can’t be taken into consideration, like the volatility of oil prices in the early 2030s and the significant value drop expected from ICE cars in the proximity of the ICE phase-out date.

Are EVs going to be dominant? You bet they will

In the worst-case scenario, where IRA subsidies don’t have the expected effect on customers, electric vehicle share in total car sales will barely reach 40% by 2032. In the best-case scenario, they could go beyond 60%.

Assuming no other subsidy program will follow IRA, a drop in EV sales is expected after 2032. But one of the IRA’s secondary goals is to support the development of the critical mass. And this study shows that this is achievable.

Different scearios for EVs sale share
Photo: ICCT
It's also important to note that plug-in hybrids’ share of total EV sales is only going down. The analysis forecasts that in 2023 they will account for 12%–14%, while in 2035, this fraction declines to 5%-8%. Besides, new methodologies for accurately measuring plug-in hybrids emissions will give a harsh time to carmakers working on this complex powertrain solution.

Of course, this is just an analysis, based on different assumptions. But it’s consistent with other entities’ forecasts and analyses: electric vehicles are going to be the new norm by the end of this decade. Of course, they are helped by subsidies. No better, faster, and more feasible option, at this point.
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About the author: Oraan Marc
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After graduating college with an automotive degree, Oraan went for a journalism career. 15 years went by and another switch turned him from a petrolhead into an electrohead, so watch his profile for insight into green tech, EVs of all kinds and alternative propulsion systems.
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