As governments around the world push for a shift from internal combustion engine (ICE) vehicles to electric vehicles (EVs) to help decarbonize, the race to manufacture a wide range of EV models is on. In addition to the electric car companies, most of the big car manufacturers are investing in the development of their electric vehicle business, well aware that the market for ICE vehicles will decline in the coming decades. But as companies rush to source the components needed for production and the metals and minerals needed for electric vehicle batteries, they must contend with supply chain constraints and high costs. This has led car manufacturers to charge high prices for their EVs, with the cost of buying an EV still generally much higher than an ICE alternative. But now, the age of the low-cost EV could be just around the corner with promises of more affordable options.
After a huge investment in electric vehicle technology and manufacturing processes, we can soon expect car manufacturers to announce a range of much lower electric vehicle models. Tesla, one of the leaders in the electric vehicle market, is expected to announce next year a new generation car with starting prices between 25,000 and 30,000 dollars. This marks a significant price decrease from the existing Model 3 manufacturer’s suggested retail price (MSRP) of $41,990.
While Tesla has generally been seen as the more expensive luxury electric vehicle option, other companies have worked to lower the price of their electric vehicle models to make them more competitive in a market dominated by Tesla. For example, the Chevy Bolt, Bolt EUV, and Nissan Leaf are priced under $30,000. Although, many retailers charge consumers more than $30,000.
With the price of new ICE vehicles increasing in recent years by around 30 percent, electric vehicles may finally seem more affordable to consumers. And as several cities around the world announce plans to ban the sale of ICE vehicles over the next decade, many consumers are looking to switch from ICEs to EVs, but until recently EVs have largely been seen as the car of the elite. because of its high price. The lack of charging infrastructure has also discouraged many. But the U.S. government, like many others around the world, is rapidly introducing policies that support electric vehicle adoption, with plans to roll out major electric vehicle infrastructure across the country. Related: Chevron beats profit estimates as refining margins jump
The introduction of the low-cost EV is further supported by the Biden administration’s impressive $7,500 tax credit, aimed at encouraging consumers to switch to electric. The tax credit was announced under the Inflation Reduction Act (IRA) of 2022 to improve the affordability of electric vehicles for consumers. Although fewer new electric vehicles are expected to be eligible for the credit after the new Treasury Department requirements take effect.
In 2022, the US Departments of Transportation and Energy announced nearly $5 billion in funding for the National Electric Vehicle Infrastructure Formula Program, established by President Biden’s Bipartisan Infrastructure Act. And in February of this year, the Department of Energy announced it would invest $7.4 million in seven projects to develop hydrogen corridor and medium- and heavy-duty electric vehicle charging infrastructure to benefit millions of drivers from 23 states. This is expected to support EV adoption as automakers announce more competitive, lower-priced models.
So far, the price of electric vehicles in major markets has been 45 to 50 percent higher than a comparable ICE model, except in China where it is around 10 percent higher. China is able to achieve this low price thanks to its large role in EV component manufacturing, as well as its dominance of the metal and mineral mining industries, providing about 60 percent of the world’s lithium supply. last year.
More than 60 new models of electric vehicles are expected to be launched in the coming years, many at a much lower price than those currently on the market. In March, Volkswagen announced a model on the European market priced below €25,000. Startup Fisker expects to launch its $29,000 PEAR crossover in the U.S. in 2024, while GM is expected to launch its sub-$30,000 Chevrolet Equinox electric utility vehicle later this year. These vehicles are expected to change the U.S. consumer auto market when you consider the additional tax credits that buyers could be eligible for under the IRA.
While high-end EV models will still be available, which can offer longer range, a more powerful battery and higher speeds, as with ICE vehicles, development of the low-cost EV is underway and it will soon be widely available. With the addition of an impressive tax credit in the US, and with similar schemes available in other parts of the world, consumers are likely to reach out to get their hands on a cheap EV model while it’s still around have government incentives.
By Felicity Bradstock for Oilprice.com
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