Production Cost of Electric Vehicles will Become Cheaper by 2027: Gartner

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Research firm Gartner has released a comprehensive report on the global electric vehicle industry indicating that EVs will dominate roads.

Production Cost

BEVs will become cheaper to produce than comparable internal combustion engine (ICE) vehicles by 2027. This projection is attributed to innovative manufacturing methods that are significantly lowering production costs, market research firm Gartner predicts.

As original equipment manufacturers (OEMs) revamp their manufacturing operations alongside product design, BEV production costs are anticipated to plummet faster than battery costs.

Gartner’s analysis foresees production costs dropping at a faster rate than the costs associated with batteries, which currently represent approximately 40 percent of an EV’s total price tag. These cost reductions are being driven by advancements such as centralized vehicle architecture and the adoption of gigacastings, pioneered notably by U.S. market leader Tesla. Gigacastings enable the creation of large single pieces for vehicle underbodies, streamlining production processes and reducing assembly time.

Pedro Pacheco, Vice President of Research at Gartner, emphasized the impact of these technological innovations, stating, “This new technology means BEVs will achieve cost parity with ICE vehicles much sooner than originally anticipated, although it will also result in significantly higher repair costs for BEVs.”

Repairing Cost

By 2027, the average cost of repairing EV body and battery damage resulting from serious accidents could surge by 30 percent. Consequently, vehicles involved in collisions might face total write-offs due to repair expenses surpassing their residual value. This trend may lead to increased insurance premiums or insurers refusing coverage for specific EV models.

Pacheco cautioned against prioritizing BEV production cost reduction at the expense of escalating repair costs, warning of potential consumer backlash. He stressed the necessity of implementing processes to ensure affordable repair costs alongside innovative BEV manufacturing methods.

Already, concerns over the high costs associated with repairing EVs are looming among prospective buyers. Gartner warns of a potential consumer backlash if reductions in production costs coincide with escalating repair expenses.

EV Market

EV sector is witnessing consolidation as startups, enticed by perceived opportunities, ventured into the market. However, many remain heavily reliant on external funding, making them vulnerable to market fluctuations. Additionally, the gradual phasing out of EV-related incentives in various countries adds to the challenges faced by incumbents.

Moreover, Gartner predicts a shakeup in the EV market, with approximately 15 percent of EV companies established since the previous decade either being acquired or facing bankruptcy by 2027. However, Pacheco reassures that this turbulence does not signify a collapse of the EV sector but rather marks the onset of a new phase where companies offering superior products and services will emerge as winners.

“Innovations such as centralized vehicle architecture and gigacastings have streamlined production costs,” Pedro Pacheco, Vice President of Research at Gartner, said.

Despite these challenges, EV market penetration is expected to continue growing in 2024, with Gartner estimating EV shipments to reach 18.4 million units.

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