For widespread adoption to be successful, electric vehicles (EVs) need to be sold at prices comparable to internal combustion engine (ICE) vehicles while still generating profits for manufacturers. Despite recent supply chain issues affecting battery affordability, both General Motors (GM) and Volvo are now predicting that this will happen by the mid-2020s.
During a recent interview at the unveiling of the electric SUV EX90, Volvo Cars CEO Jim Rowan stated that he expected to achieve price parity with internal combustion engine cars around 2025. Rowan anticipates that technological improvements will allow for greater range without increasing the size of battery packs, resulting in some cost savings.
GM expects EV profits to match internal combustion engine vehicles by 2025, years ahead of schedule, according to CEO Mary Barra during the company’s investor day. The Investment Tax Credit (ITC) was also a significant factor in this optimistic prediction, as advanced incentives are expected to boost profit margins for future EVs, according to CFO Paul Jacobson.
Both GM and Volvo believe that the ITC will eventually create a stronger business case for EVs. However, in the meantime, the ITC has made some EVs more expensive through a renewed EV tax credit that significantly reduces the number of qualifying vehicles.
GM and Volvo are the latest examples of automakers predicting lower EV prices that will make them more competitive with ICE cars and trucks. Once EVs and ICE vehicles achieve parity, many anticipate one of the most transformative periods in automotive industry history, although one crucial element, the price of battery packs, regressed in affordability in 2021 and 2022. This persists even as battery plants have expanded due to raw material limitations. This year, prices for used EVs also increased, so multiple market factors must align for everyone to agree that EVs are no longer more expensive upfront.
