Electric cars are already cheaper than internal combustion engine models in China

Almost no one doubts the important advantages of electric cars, such as saving fuel and emissions. But there is a barrier in the form of price, which slows down their sales. But this is happening in Europe and the US, but not in China. The world’s largest car market, accounting for more than one in two of the world’s electric vehicle sales, is in stark contrast to some electric ones, which managed to improve the prices of internal combustion engines.

This is indicated by the latest analysis from Bloomberg, which shows how China has already achieved price parity between electric and internal combustion engine vehicles.

In 2023, the average purchase price of a 100% electric vehicle in China was $32,138, while non-hybrid (gasoline, diesel) and non-plug-in hybrid vehicles sold at an average price of $34,296 to $41,446, respectively.

Of course, the cars being purchased are in different segments, which allows one of China’s main trends – urban electric vehicles – to offer a low-cost alternative that can significantly reduce average costs.

However, the Chinese market has advanced significantly, and excluding these “microcars” and taking only plug-in hybrids as a basis, they sold for an average of $34,290. This means that PHEVs are cheaper than regular hybrids on average.

Another interesting fact is that in the first quarter of 2024, almost two-thirds of the 100% electric models sold in China (64.2%) had The selling price is below the average cost of an equivalent thermal model.

This figure was 51.9% for electric models last year, indicating the strong growth and acceleration that the sector is experiencing in the Chinese market as supply increases and prices fall.

Why are electric cars cheap in China?

The main factor explaining such a drop in prices of electric vehicles in China is the cost of your battery

They continued to decline earlier this year after a small temporary rise in late 2023.

The reduction in costs was due to falling raw material prices, which, unlike in Europe, Chinese producers applied to their tariffs.

Thus, the average cost of a nickel battery (NMC811, NMC955 and NCA) in China was 104.3 USD/kWh in April 2024while a year earlier in the same April this figure was $151.2/kWh. This means a 31% drop in a year.

For their part, the increasingly popular LFP elements followed the same trend, losing almost 37% over the year. The average cost of a package was $75.3/kWh in April 2024, compared to $119.3/kWh in April 2023.

This fall in the cost per kWh was accelerated by the decline in battery maker profitability, which averaged over 30% at the start of 2023 and fell to less than 10% in March 2024 due to the US war to gain as much market share as possible.

This race for quota has led the Chinese battery industry to overcapacity, which has played a major role in the drop in selling price.

According to Bloomberg: “Average capacity utilization at battery factories in China has fallen from 51% in 2022 to 43% in 2023 and will be even lower this year. China’s largest manufacturers, CATL and BYD, continue to invest heavily in R&D, automation, and new factories, and launch new products at a breakneck pace.“.

Bloomberg predicts that prices will continue to fall over the next two years, widening the differences between electric and combustion engine vehicles and further accelerating the adoption of the technology, which will account for more than 50% of the Asian giant’s sales this year.

When will Europe have price parity?

In our market, the lack of vision from producers and administration will delay this moment for several years.

According to Bloomberg, This will not happen before 2027. an electric car costs the same to produce as a diesel, petrol or hybrid model. Almost a three-year difference, which will reduce the competitiveness of the old continent groups, which will have little or nothing in common with their Chinese competitors, who in two or three years will have built up a distribution and service network in Europe, and will be massively unloaded with more competitive products in absolutely all respects.

Source | Bloomberg