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Electric vehicles to hit price parity with regular cars in 5 years, expert says

An International Energy Agency expert told battery minerals hopefuls at a Perth, Western Australia, mining conference that electric cars will reach price parity with internal combustion engine cars in five years, but limited driving range, charge infrastructure and high purchase costs remain barriers.

Belgium-based Bert Witkamp, operating agent for the Paris-based organization's Hybrid Electric Vehicle Technology Collaboration Taskforce, told the Battery Minerals Conference on March 12 that electric cars would achieve price parity with traditional cars in five years, though that could be sooner for some models and later for others.

Witkamp later said during a panel session that another important factor was that electric cars are increasingly being leased by not only businesses but private consumers, so the purchase cost is no longer such a concern.

Witkamp said that while "nobody believed electric cars would be significant" only three years ago, the fact that Tesla Inc.'s Model 3 is set to become one of the United States' top-selling cars when the company did not exist 10 years ago shows how much perception has changed.

Tesla outselling all other more established automakers' cars showed what happens when such cars become available in large quantities.

Witkamp also cited Norway, which he said is five to 10 years ahead of most countries in electric car adoption.

He showed data from September 2018 revealing that 60% of all new cars sold there were electric despite its apparent nonideal climate for such vehicles, with its mountains and cold weather. The feat was even more remarkable considering there are less than a dozen electric car models to choose from, as opposed to dozens of types of "regular" cars.

Diesel car sales in Norway have also fallen from above 70% a decade ago to less than 20% now, which Witkamp said shows how quickly the transformation can occur, especially when electric cars are "more fun to drive."

"You're not going to buy old technology when the new is cheaper, more fun and nicer. So my personal conviction is that when the tipping point happens, it will happen very, very fast ... much faster than what most analysts think."

Confusing outlook

Galan Lithium Ltd. Managing Director Juan Pablo Vargas de la Vega, a former resources analyst at Patersons Securities and Foster Stockbroking, said that while many juniors such as his expect the "tipping point" of price parity to arrive soon, no one really knows when.

While such an event would be a price catalyst for battery metal stocks, he said in an interview March 13 on the conference sidelines that "the world is yet to grasp what is required" in terms of raw materials.

"The world is changing, and probably nobody will notice [the tipping point] until it's right in front of our face," de la Vega said.

Lithium Australia NL Managing Director Adrian Griffin said in response to a question during a panel session that while "range anxiety" for electric vehicles is an issue, they are still, in many cases, already cheaper than traditional cars in terms of operation and maintenance.

Both de la Vega and Griffin noted other variables impacting mass adoption of electric cars such as changing battery chemistry and packaging, which can make batteries more efficient and charge faster.

"It depends on where you fuel your vehicle from and what the cost of energy is, but in very general terms, the operating cost on an electric vehicle is substantially lower than an internal combustion engine," Griffin said. "When you take that into account over a life of about 10 years, you're probably already in front with an electric vehicle."

Witkamp said key assumptions for forecasting how much and which raw materials are needed in electric vehicles are not always apparent.

As an example, he cited forecasts by BMO, Roskill, McKinsey, Bloomberg New Energy Finance and Bank of America Merrill Lynch for nickel consumption in batteries by 2025, which varied from less than 400,000 tonnes to 750,000 tonnes.

Yet he said things are happening rapidly, so much so that while Bloomberg's forecast that annual electric car sales would hit 30 million by 2030 and 40 million by 2040 was considered "very optimistic" in 2018, he would now almost consider it a "base case."

Witkamp said Volkswagen's announcement to stop developing new internal combustion engines by 2026 also spoke volumes about this pace of change.

In a March 13 statement, Czech Republic-focused Euro Manganese Inc. also noted Volkswagen's intention to accelerate the production of electric vehicles, adding 20 more "electric models" to its planned lineup to produce 22 million electric vehicles in the next decade.