Electric vehicles cheaper to buy than petrols and diesels in five years

May 28, 2021

Electric cars could be as cheap to buy as petrols and diesels within five years if the right decisions are taken now. That’s the conclusion from a new study commissioned by T&E that looks at the upfront costs of battery electric cars and how fast they can reach 100% sales across all European countries. But it warns that failure to make the right decisions now could mean fossil fuel cars will still be sold in 2035.

For several years e-cars have been cheaper to run than those fuelled by petrol and diesel, but the high upfront cost of buying them has put electric vehicles out of reach for many drivers. The gradually sinking costs of electric vehicles (EV) means they are reaching price parity much quicker, but the point at which e-cars are no more expensive to buy will be psychologically and financially significant in the battle to decarbonise road transport.

That point will come “no later than 2027” in every light vehicle segment across Europe according to the new study by BloombergNEF for T&E. But it will only happen if signals are set by lawmakers such as tighter vehicle CO2 targets in the coming years and strong support for charging infrastructure, which will drive investment in e-vehicle manufacture.

The study finds that medium-sized electric saloon cars will be cheaper to buy than their petrol and diesel equivalents by 2026, with smaller cars reaching parity in 2027. This will result from falling battery costs, improvements to EV design, and EV-specific production lines in factories, and is likely to happen irrespective of government subsidies to encourage drivers to switch to electric.

But EV production volumes are still too low to reach mass market scale, meaning that only rapid investment in EV technology will bring parity by 2026 and 2027. T&E is therefore warning that a failure by the EU and member state governments to set CO2 emissions limits that force carmakers to invest in EV technology will not only delay parity, but could threaten the chances of ending sales of fossil fuelled cars by 2035.

T&E’s senior director for vehicles and e-mobility Julia Poliscanova said: EVs are the future. They will be cheaper than combustion engines for everyone, from the man with a van in Berlin to the family living in the Romanian countryside. Electric vehicles are not only better for the climate and Europe’s industrial leadership, but for the economy too. Given the urgency of tackling climate change, polluting vehicles shouldn’t be sold for any longer than necessary, but for that time to be kept to a minimum, ambitious decisions need to be taken now.”

With negotiations on a new round of CO2 standards for new cars due to start in July, T&E is calling for a new standard for 2027 so that carmakers do not allow sales to stagnate until just before the next target in 2030. The BloombergNEF study says that the early build-up of EV production and sales will be crucial to drive down costs and generate consumer buy-in for further adoption in the future.

T&E says the EU must take an even stricter line on CO2 emissions from vans, as e-vans account for just 2% of sales because of weak emissions standards that fail to stimulate manufacturers to invest.

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