By 2030, EVs could cost the same as their gas guzzling siblings

In the U.S., battery electric and plug-in hybrid cars have been more expensive than their gasoline-powered counterparts, costing about $8,000 more on average. Experts say EVs are poised to achieve price parity with internal-combustion engine vehicles in just a few years though, because the single costliest part of an EV — the battery that powers it — is getting cheaper.

“We still have a price premium for EVs,” said Stephanie Valdez Streaty of the data firm Cox Automotive. “Since the battery is about 40% of the cost of a vehicle, the battery price going down is going to be critical.”

In China, cheaper batteries have led to broader adoption of electrified vehicles, because it’s allowed EVs to be, on average, “fully cost competitive with internal combustion engine vehicles in terms of sticker price,” said Colin McKerracher of research firm BloombergNEF.

One in every two Chinese consumers in the market for a new car has opted for an EV or a hybrid plug-in.

China lowered costs for EV batteries by integrating supply chains and betting on cheaper-to-produce battery technology known as lithium iron phosphate which relies on iron as one of the key components, instead of expensive rare earths.

In the West, many companies bet on a competing battery technology called NMC, nickel manganese cobalt, which can store more energy in less space but is dependent on several expensive rare earth minerals.

Over the last decade, McKerracher says Chinese engineers have improved LFP batteries. They’re now smaller and charge faster, which has made them attractive to automakers in the West.

“It has become the main battery technology going into EVs around the world. So just last year, it crossed over 50% of all batteries going into EVs around the world,” McKerracher said.

As automakers accelerate adoption, electric vehicles in the U.S. are forecast to get cheaper, as well. Analysts say they’ll cost the same as internal-combustion engine vehicles in the next three to four years.

“In order for adoption in the U.S. to occur, it's an economics game, and that 15 to 20% premium that battery electric vehicles have to the [internal-combustion engine] vehicles, that needs to come down and we need to see parity,” said CJ Finn, who leads advisory firm PwC’s automotive division.

Once that happens, Finn expects electric vehicle sales here to accelerate to as much as 30% of all new vehicle sales “with hybrids taking about another third, or slightly more than that, and [internal-combustion engine] vehicles being a third.”

That would be a dramatic change. Last year, just 22% of all new vehicles purchased in the U.S. were electric or hybrid.