Electric vehicles to cost the same as petrol cars by 2018
The cost of owning an electric car will fall to the same level as petrol-powered vehicles next year, according to bold new analysis from investment bank UBS which will send shock waves through the automobile industry.
Experts from the investment bank's "evidence lab" made the prediction after tearing apart one of the current generation of electric cars to examine the economics of electric vehicles (EVs). They found that costs of producing EVs were far lower than previously thought but there is still great potential to make further savings, driving down the price of electric cars.
As a result, UBS forecasts that the "total cost of consumer ownership can reach parity with combustion engines from 2018", with this likely to happen in Europe first.
"This will create an inflexion point for demand," the analysts said. "We raise our 2025 forecast for EV sales by 50pc to 14.2 million - 14pc of global car sales."
If the prediction comes to pass, traditional car industry giants could face ruin. Germany's Volkswagen - the world's biggest car company - is racing to catch up with rivals' investment levels in electric drivetrains, the components which deliver the power into the wheels, having largely ignored the technology in the past.
UBS's research was to help understand what it called the "most disruptive car category since the Model T Ford". The findings are based on its deconstruction of a Chevy Bolt, which it considered to be "the world's first mass-market EV, with a range of more than 200 miles".
The 2017 car - which sold in the US for $37,000 - was taken apart piece by piece and the parts analysed. UBS said the Bolt's electric drive was $4,600 cheaper to produce than thought. "We estimate that GM (which builds the Bolt) loses $7,400 in earnings before interest, and tax on every Bolt sold today, mainly due to a lack of scale."
Tesla's highly anticipated Model 3 - another small electric vehicle - is expected to lose billionaire Elon Musk's company $2,800 per car for the base version, but Tesla will break even at an average selling price of $41,000 in the US.
This will be achieved as customers opt for higher spec vehicles, making electric cars a viable business proposition, with upmarket EVs likely to be more profitable than mid-range versions.
Although the costs of EVs and current cars will be the same for motorists by 2018, manufacturers will not reach parity until 2023, when they will make 5pc margins on EVs - about equal to the profit on current vehicles.
EVs matching the cost of conventionally fuelled cars sooner than expected will send a seismic shock throughout the sector, from manufacturers right down through their supply chains, with UBS warning "the 'time to get ready' and win in the space shrinks".
It also warns that the aftermarket for replacement parts could be radically disrupted because electric drivetrains suffer less wear than traditional engines. "Our detailed analysis of moving and wearing parts has shown that the highly lucrative spare parts business should shrink by about 60pc in the end-game of a 100pc EV world, which is decades away," UBS said.
It also forecast tech companies will grab a bigger slice of the industry.