Gartner predicts a faster decline in production costs compared to battery costs, which represent the most significant expense in an electric vehicle, accounting for approximately 40% of its price.
According to a recent analysis by the market research firm Gartner, battery electric vehicles (BEVs) are anticipated to become more affordable to manufacture than their internal combustion engine (ICE) counterparts by the year 2027. This shift in cost-effectiveness is attributed to innovative manufacturing techniques that are significantly reducing production expenses.
Gartner predicts that the costs associated with producing electric vehicles will decrease much faster than the costs of batteries, which currently constitute approximately 40% of an electric vehicle’s total price.
The firm’s findings are based on advancements that streamline production costs, such as the adoption of centralized vehicle architecture and the implementation of gigacastings. Gigacastings, a concept popularized by Tesla, the leading company in the U.S. market, involves large casting machines to create substantial single pieces of vehicle underbodies. This approach simplifies production and minimizes the workload for robots.
Pedro Pacheco, the Vice President of Research at Gartner, mentioned that adopting new technology would lead to battery electric vehicles (BEVs) reaching cost parity with internal combustion engine (ICE) vehicles much earlier than initially expected. However, he also noted that this would lead to some repairs for BEVs becoming considerably more costly.
The firm anticipates that by 2027, the average cost of repairing an electric vehicle’s body and battery following a severe accident will increase by 30%. This rise in repair costs could lead to a higher likelihood of vehicles being deemed total write-offs after collisions, as the cost of repairs may exceed the vehicle’s residual value.
Prospective electric vehicle buyers are already concerned about the potential for high repair costs. Gartner warns that consumers could backlash if reductions in production costs are offset by increased repair expenses.
Additionally, Gartner predicts that around 15% of electric vehicle companies founded in the last ten years will either be acquired or face bankruptcy by 2027. Pacheco further explained that this trend does not indicate the collapse of the electric vehicle industry. Rather, it signifies the onset of a new era in which companies that provide outstanding products and services will prevail.
