Tax cuts and subsidies mean that taxpayers need to pick up some of the tab on EV purchases.
Electric cars are a great green option over traditional vehicles that burn fossil fuel to propel themselves forward. Their carbon footprints are negligible compared to cars with internal combustion engines (ICE) and as automakers have been rolling out swanky new EV designs, they can also compete favorably in the looks department.
So why aren’t electric cars far more popular with buyers?
Last year there were an estimated 3 million electric and plug-in hybrid cars on the roads worldwide, which may seem like a lot until you consider that the number of cars with ICE stood well over 1 billion. To be sure, the sale of electric vehicles is picking up in some counties. Last year almost 580,000 electric cars were sold in China, accounting for a 72% increase over 2016. In the US, meanwhile, some 280,000 electric cars sold in 2017, up from 160,000 the year before.
These sales figures are encouraging, but they are hardly earthshattering. As oil prices remain high, electric vehicles should become more appealing to buyers. The trouble is that electric vehicles tend to be markedly more expensive than their comparable counterparts with internal combustion engines. Generous subsidies in countries like Norway, where electric cars accounted for more than a third (39%) of all new car sales last year, have helped make electric vehicles more popular there. Yet tax cuts and subsidies on EVs simply mean that taxpayers need to pick up some of the tab on the purchases of new electric vehicles.
Policymakers recognize this, of course. In countries like the United Kingdom, cash-strapped governments are scaling down some of their green initiatives, which could well add thousands of euros to the price of new electric vehicles. Tesla’s models already cost anywhere from €36,000 to €156,000 with many of its popular models selling for more than €100,000. Electric vehicles produced by other manufacturers tend not to come cheap, either, with most of the cheapest models costing upwards of €35,000. Those prices are well beyond the means of many Europeans.
That is why electric vehicles are set to remain a luxury of sorts, compared to fuel-burning cars. The reason is that the price of electric car batteries continue to be high and are bound to remain so in the foreseeable future. “It’s very simple,” Klaus Frölich, a senior executive at the German automaker BMV, noted in a recent interview. “You can produce whole cars, only with the cost of the battery.” Specifically, the cell alone in battery packs of 90 to 100kWh costs somewhere between €10,500 and €15,000.
The price of lithium for the current generation of lithium-ion batteries is high and will remain high. Even metals like cobalt that are essential ingredients in such batteries are bound to cost more, not less. “When everybody wants to have cobalt, the prices of cobalt will not go down, they will go up,” Frölich said. In other words, bringing the price of electric vehicles down to the level of fuel-burners will be no easy task.