Are Electric Cars Finally Cheaper to Buy Than Gas Cars in 2024?

If you’re car shopping next year, you may be wondering: will electric cars cost less to buy than comparable gas-powered models by 2024? With conflicting claims around EV sticker prices – and helpful tax incentives threatening to expire – it’s a great question. This article looks at the key forces shaping EV manufacturing costs and pricing to help you decide if 2024 is finally the year EVs pay off at the dealership.

Why Have EVs Historically Cost More Than Gas Cars?

Looking back over the last decade, battery-powered electric vehicles have carried premium price tags well above similar internal combustion cars and trucks at the mediantrim level.

Historical Price Comparison of Average EV and ICE Car Models

Several interrelated reasons have driven these EV sticker prices upwards:

Costlier Manufacturing: As a still-maturing technology, EV production volumes have lagged behind long-established ICE vehicle assembly infrastructure. With fewer EVs produced each year compared to gas autos, substantial fixed manufacturing investments like plant equipment and engineering spend were spread across lower production numbers. These diseconomies of scale directly increased per-unit cost.

Expensive Batteries: Massive battery packs have made up 30-50% of total EV manufacturing expense with cells and raw materials representing the single biggest input cost. Compared to the simple fuel tanks and inexpensive gasoline that propel traditional cars, lithium ion batteries remain a pricier – albeit cleaner – way to deliver driving range.

Minimal Choice: Slow initial mainstream customer adoption of EVs due to lingering range anxiety and lack of model availability reduced economies of scale. Lower demand signaled carmakers to limit investments in new models. This lack of EV choice allowed early movers to price offerings higher and still clear lean inventories.

Are the underpinnings finally falling into place for cheaper EV sticker prices as we turn the corner into 2024?

3 Emerging Trends That May Finally Reduce EV Prices

Common Platforms

Shared modular component sets like Volkswagen’s MEB underpin multiple models, concentrating EV-specific development and manufacturing setup costs more efficiently. These unified ‘skateboards’ allow differentiation across vehicles by pairing standardized battery packs with varying motor configurations and vehicle bodies.

General Motors’ Ultium platform takes this approach by providing wireless battery and drive unit building blocks usable across an array of models like the upcoming Equinox and Silverado EVs. Their flexible architecture hopes to capture cost benefits akin to VW’s ambitious bid for EV scale dominance.

Economies of Scale Kicking In

As legacy automakers pivot model lines to battery-electric, global EV production is projected to almost triple by 2025 according to data from BloombergNEF. This boost in manufacturing volume spreads fixed costs over substantially more units, dropping per vehicle outlays. It also justifies increased capital spending on next-generation EV-specific plant and equipment optimized for higher volumes.

Plummeting Battery Prices

Industry average lithium ion cell costs have fallen 89% over the last decade approximates BloombergNEF. Continuing downward pressure comes from improving energy density, smarter battery thermal management, and upgrades on the material side like cobalt-lite cathodes.

Goldman Sachs forecasts lithium ion pack prices will hit $92 per kWh by 2025 – a 20% drop annually. Hitting this cost curve inflection point makes EVs cost competitive with ICE far sooner.

Projected Lithium Ion Battery Pricing Through 2030

While these tailwinds paint an improving picture, just how deeply will they cut EV prices by the 2024 model year?

Can Government Incentives Accelerate 2024 EV Affordability?

Subsidies and incentive policies also sway EV affordability calculations by directly reducing out-of-pocket purchase expenses:

Lucrative Federal Tax Credits

The recently renewed $7,500 federal EV tax credit drops net acquisition cost instantly if your 2024 tax liability exceeds the credit value. Just note that income caps and vehicle criteria around final assembly location still govern eligibility.

For our median price Tesla Model 3 example, that’s an instant 12% price slash the moment you drive off the lot.

State & Local Rebates

State and local subsidies can stack atop federal breaks to drive prices down farther. California’s generous $7,000 point of sale rebate applied to the $48,190 Model 3 cuts the effective buyer price over $14k to $34,190.

Utility kickbacks for installing EV chargers and employer electric vehicle discounts can further tip value scales.

Car ModelMSRPFederal Tax CreditState RebateEffective Price
Tesla Model 3$48,190$7,500$7,000$33,690

So can creative assembly of incentives finally make EV sticker prices a better value than gas rivals when you head to buy in 2024?

Do Mainstream EV Models Reach Unsubsidized Price Parity in 2024?

Entry-level electric models like the 2024 Chevrolet Equinox EV small crossover make a compelling case around unincentivized sticker price competitiveness with gas counterparts:

Car ModelDrivetrainPrice
Equinox LSICE$26,695
Equinox EVElectric$30,000

Accounting for equipment differences the $30,000 MSRP Equinox EV comes astonishingly near to its $26,695 ICE sibling before discounts or tax breaks.

But meeting true parity across higher volume mainstream EVs likely still remains 1-2 years on the horizon according to most forecasts – here’s why:

-Battery packs are improving but still need to fall around 20-25% further to fully equalize EV ownership costs
-ICE vehicles optimize manufacturing investing over decades compared to still maturing EV production lines
-Labor, raw materials, and equipment price inflation counterbalance some EV efficiency gains

The upshot? Savvy 2024 car buyers will likely best exploit purchase price parity right now by targeting entry EV trims and combining incentives.

5 Year Total Ownership Costs Make EVs a Smarter 2024 Buy

New car shoppers shouldn’t fixate just on EV sticker prices either – total cost over the first years of ownership paints a financial picture more favorable to electricity:

According to Consumer Reports analysis, a mainstream EV matching features of an equivalent gas car still saves owners over $6,000 inclusive of purchase factors like depreciation, tax incentives and financing:

Total 5 Year Ownership Cost - EV vs ICE Car

Trading pump costs for cheaper home charging, bypassing oil changes, and needing less brake work build an economic case for EV shoppers that goes beyond the window sticker.

The Road Ahead Looks Electric

While rising battery volumes will likely bring key EV manufacturing expenses down in the coming years, changing regulations and gas price volatility may swell ICE maintenance and fuel bills.

Savvy car buyers in 2024 stand to come out money ahead by going electric – especially when state and federal incentives enter the math. Consider total ownership costs, not just sticker price for the best deal on your next set of car keys.

Data Analyst Musings leverages over a decade of auto industry analytics experience to cut through the claims around electric vehicle affordability. We deliver unbiased data to inform your clean transportation decisions.

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