EV Prices Drop 25% Since 2018: Shrinking The Gap With Gas Cars
EV Prices Have Dropped 25% Since 2018, Closing The Gap With Gas Cars, But Regional Disparities And China’s Dominance Challenge Western Automakers
The landscape of electric vehicle (EV) pricing is undergoing a dramatic transformation, with new data revealing that the price difference between electric and conventional vehicles has shrunk considerably since 2018.
EV Prices Drop While ICE Vehicle Costs Rise
According to Jato Dynamic’s comprehensive analysis, the average price of EVs has fallen by 25% since 2018, contributing to a remarkable narrowing of the price gap between EVs and internal combustion engine (ICE) vehicles. In the United States (U.S.), this difference has decreased dramatically from 50% in 2021 to just 15% in 2023, making EVs more accessible than ever before.
The narrowing price gap can be attributed to two concurrent trends, as explained by Felipe Munoz, Global Analyst at Jato Dynamics stating, “The shift isn’t solely due to cheaper EVs becoming available. While electric offerings are improving in quality and affordability, ICE vehicles have become more expensive due to increased regulation, stricter standards, and the addition of high-tech features.” During this period, EV prices declined by 11% while ICE vehicle prices rose by 14% on average.
Regional Disparities in EV Pricing
However, the global EV market reveals significant regional disparities. In Europe, the price difference between EVs and ICE vehicles remains higher at 22% as of 2024, after fluctuating from 27% in 2021 to 29% in 2022. The European situation underscores the complex dynamics affecting different markets.
Perhaps most striking is the vast price disparity between Western markets and China. In the first half of 2023, EVs were 115% more expensive in Europe and 118% more expensive in the U.S. compared to China. This substantial difference helps explain China’s impressive 40% EV adoption rate in 2024. The Chinese market’s advantage is further illustrated by the fact that almost 80% of EVs purchased in China during the first half of 2023 cost under $42,000, with a third priced below $21,000.
The stark contrast is exemplified by specific models like the Volkswagen ID.4 Pro, which was available in China for around 30% less than its U.S. price, even before considering the $7,500 federal tax credit. This pricing advantage has positioned Chinese manufacturers favorably for expansion into Western markets.
EV Affordability and Market Competition
As battery costs continue to decline and more affordable models enter the market, the trend toward price parity between electric and conventional vehicles is expected to continue. However, the major price advantages enjoyed by Chinese automakers pose a considerable challenge to Western automakers, potentially reshaping the global automotive landscape in the years to come.
This evolving situation demonstrates how the EV market is maturing, with prices becoming increasingly competitive with traditional vehicles. Nevertheless, it also highlights the ongoing challenges faced by Western automakers in matching the price points achieved by their Chinese counterparts, setting the stage for intense competition in the global automotive market.
Want to learn more about EV? Thinking of buying an EV? Head over to EV.com and discover more.