Price parity for EVs within three years on softening prices

Electric vehicles in India are expected to achieve price parity with internal combustion vehicles as early as 2027-28, on the back of easing battery prices, industry insiders and experts told DH.

This comes at a time when the growth in sales of electric vehicles has surpassed that of traditional ones, with EV sales registering 100% year-on-year growth in January 2024.

“Battery costs constitute a substantial part of the overall cost of an EV. With battery cell prices having softened in the recent past and considering their potential reduction in the foreseeable future, we have chosen to proactively pass on the resulting benefits directly to customers,” Tata Passenger Electric Mobility’s chief commercial officer, Vivek Srivatsa said, after the company reduced prices of its EV offerings by 1-8%, up to Rs 1.2 lakh.

Leading electric two-wheeler manufacturer Ather Energy reduced the price of its entry-level model, the 450S, by Rs 20,000 in January. This was followed by a similar announcement by its direct competitor Ola Electric, which slashed the price of its S1 range scooters by Rs 25,000.

MG Motors also cut EV prices by up to 1 lakh, and most original equipment manufacturers (OEMs) are expected to follow this trend, as per experts.

In India, the total cost of ownership between electric and ICE vehicles has a difference of nearly 25%, due to factors like lower costs of refueling and maintenance. However, EVs post a considerably higher upfront price tag, mainly due to high battery costs, that make up for nearly 30% of vehicle’s total cost.

“A tipping point is when the cost of an EV vehicle is within striking distance of a current ICE vehicle. This is expected to be reached within three years from today. The recent price cuts by a few EV manufacturers is a very encouraging sign,” said founder and chief executive officer Kartikey Hariyani of ChargeZone.

Hariyani added that retail adoption for EV cars has been slow, but is expected to pick up on the back of price cuts.

Softening EV prices has come at a time when the prices of ICE vehicles, especially passenger cars, has also shot up, due to increased cost pressure driven by overall inflation, stricter regulations on engines and safety, and customer expectations for more accessories.

Ola Electric

This is in contrast to the reduction in raw material costs, including metals like Lithium, that are required to build EV battery packs. At the same time, demand for batteries has continued increasing year-on-year, even as some countries like China have slowed consumption, leading to an oversupply.

Even then, the frequency of battery replacement required by EVs could continue to be a major barrier to consumption, Experts believe that the introduction of battery swapping for 4 wheelers could be of help, as consumers would then be able to buy vehicles without the battery, which can be obtained on a subscription basis.

Battery swapping in India has been growing rapidly, but is currently feasible for mainly 2 and 3 wheelers due to the smaller battery packs. Battery packs in 4 wheelers on the other hand, are important parts of the vehicle’s structural integrity, and would also require assistance in swapping, thus making them economically and technically unviable, said Shankar Venugopal, vice president and head of technological innovation at Mahindra and Mahindra.