The real costs of electric mobility (by Oliviero Baccelli)

20-07-2021 | Study

According to experts, the cost differential with respect to endothermic motor vehicles, mainly due to the cost of the batteries, will reduce in a short time until it disappears. However, regulations, technological developments and consumer purchasing choices have a substantial impact on this dynamic.

by Oliviero Baccelli (Director of the Master in Economics and Management of Transport, Infrastructure and Supply Chain at Bocconi University) 

Strategic analyzes of the true costs of electric mobility must take into account the rapid evolution of both the regulatory context and technologies. In fact, both of these factors have a strong impact on the production choices of car manufacturers, on economies of scale in production, also the result of new business partnerships such as those between PSA is FCA or between Volkswagen is Honda, or the costs of hardware and software components of the batteries.  

These factors have a very significant impact on the trends relating to the cost differential between internal combustion engine and electric cars, and the general opinion of analysts is that the current differential, mainly due to the cost of batteries, it will reduce in a short time until it disappears. For example, Bloomberg New Energy Finance highlights in the report Electric Vehicle Outlook 2019 how over the last 9 years the price of lithium-ion batteries, weighted by the volume necessary to express a capacity of 1 KWH, has gone from $ 1,160 (with purchasing power parity to 2018) in 2010, to 577 of 2014 and 176 of 2018. Furthermore, the case of Volkswagen E-Golf he points out that in the last four years, for the same weight, the amount of energy stored in the battery has more than doubled and a further improvement is expected in the coming years. 

By far the most significant factor affecting the choices in terms of engines by vehicle manufacturers in Europe and by vehicle buyers and users is the evolution of EU emissions regulations. EU Regulation 2019/631 requires compliance with new CO2 reduction targets for 2025 and 2030 which, it is estimated, can only be achieved with the sale of a consistent and increasing share of electrified vehicles. 

In the EU in 22 years, from 1995 to 2017, CO2 emissions from registered cars fell by 36%. In just 2 years (from 2018 to 2020) a further reduction of 20% is required in a context in which both in 2017 and in 2018 the average level of carbon dioxide emissions of new registered cars rose due to a strong increase in sales of petrol cars versus diesels and a growing component of SUVs, which have higher average fuel consumption due to their greater weight. 

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