Electric vehicles have been a topic of interest for many years, with manufacturers constantly working to make them more accessible to a wider audience. As we look ahead to 2025, it appears that electric cars are becoming more affordable than ever. Several key manufacturers have announced new models that are expected to be priced at under £15,000.

• Dacia has announced its second circa £15,000 EV, BYD’s Dolphin Surf will arrive later this year and also cost around £15k, the new Fiat Panda EV is priced at £22,000 and VW’s ID.1 small EV has been revealed with an estimated start point of £17k for 2027.
• The prices of electric vehicles are starting to catch up with their combustion engine equivalents, with Mercedes announcing the new electric CLA – with a range of 495 miles – will go on sale at the end of this year will match the £40,000 start price of the hybrid version.

But how are manufacturers managing to bring the cost of electric vehicles down? There are three key factors at play here.

1. 1. Battery costs are falling
2. 2. Growth of cheap Chinese EVs
3. 3. Wider availability of electric cars

Battery costs are falling

The cost of lithium-ion batteries has always been one of the most significant costs of manufacturing an electric vehicle. However, BloombergNEF’s annual battery price survey last year found that their costs have fallen by 20 per cent. This represents the steepest fall in lithium-ion battery pack prices in seven years.

“A few things contributed to this drop, but the surge in global production capacity for EV battery cells led by China – the country is expected to produce enough cells to meet 92 per cent of global demand – has created downward pressure on prices. Cheaper materials, including the costs of metals and components as well as the uptake of lithium iron phosphate (LFP), which are more affordable, has driven prices down.”

The average price of a battery pack has fallen to $115 per kWh, which is a significant step towards achieving price parity between electric vehicles and internal combustion cars. Price parity Price parity refers to the situation where the cost of an electric vehicle is equal to the cost of its internal combustion engine equivalent. Achieving price parity is crucial in making electric vehicles more accessible to a wider audience. The forecast by Goldman Sachs Research suggests that next year battery prices could drop by 50 per cent from 2023, which is the moment they would achieve near ownership cost parity with ICE cars. By 2030, BloombergNEF predicts prices will fall even further, as low as $69 per kWh. Ownership cost Ownership cost refers to the total cost of owning a vehicle, including the purchase price, operating costs, and maintenance costs. Achieving ownership cost parity means that the cost of owning an electric vehicle is equal to the cost of owning a conventional vehicle. The drop in battery prices is already helping to reduce the premium price tag of zero-emission cars. When Mercedes unveiled its new CLA EV, the German marque also confirmed that the circa £40,000 EV will be able to be priced the same as the hybrid version because battery production costs have fallen by 30 per cent. This has reduced the EV’s overall cost by 15 per cent.

Growth of cheap Chinese EVs

The growth of cheap Chinese electric vehicles is another factor contributing to the falling cost of electric vehicles. In 2023, around three in five electric cars sold in China were already cheaper than their internal combustion engine equivalents. On the other hand, the International Energy Agency (IEA) states that BEVs sold between 2022 and 2023 in Europe were roughly 40 per cent more expensive than conventional cars. However, the situation is changing. Last year, BYD dethroned Tesla as the largest electric-car producer worldwide, selling $107 billion worth of cars worldwide (including hybrids) compared to Tesla’s $97.7 billion. As BYD, MG (Chinese-owned by SAIC Motors) and new brands like Chery’s Omoda bring these cut-price EVs to UK shores, it means drivers can get their hands on cheaper EVs and it forces European suppliers to drop their prices too. Increased competition Increased competition is a key factor in reducing prices. As more brands enter the market, suppliers are forced to drop their prices to remain competitive. The classic laws of economics say that with increased supply comes falling prices, and the flurry of new electric cars on sale is shifting that supply curve right.

Wider availability of electric cars

The wider availability of electric cars is another factor contributing to the falling cost of electric vehicles. There are now over 130 EVs on sale in the UK – staggering when there were just eight models on offer in 2015. Supply curve The supply curve is a graphical representation of the relationship between the quantity of a good or service and its price. When the supply curve shifts to the right, it means that the quantity of a good or service increases, and the price decreases. The supply of new electric cars is consistently increasing as more brands electrify their line ups. Electrification Electrification refers to the process of converting a vehicle’s engine from a combustion engine to an electric motor. This process allows vehicles to run on electricity rather than gasoline or diesel. The wider availability of electric cars is making electric vehicles more accessible to a wider audience, and it is helping to reduce the premium price tag of zero-emission cars. Accessibility Accessibility refers to the ability of a good or service to be acquired and used by a wide range of people. In the case of electric vehicles, accessibility is crucial in making them more accessible to a wider audience. The wider availability of electric cars is helping to increase accessibility, and it is making electric vehicles more appealing to a wider range of people. Appeal Appeal refers to the attractiveness of a good or service to potential buyers. In the case of electric vehicles, appeal is crucial in making them more appealing to a wider range of people. The wider availability of electric cars is making electric vehicles more appealing, and it is helping to increase appeal, making electric vehicles more attractive to a wider range of people. The prices of electric vehicles are starting to catch up with their combustion engine equivalents, with Mercedes announcing the new electric CLA – with a range of 495 miles – will go on sale at the end of this year will match the £40,000 start price of the hybrid version.