Gartner, a research and advisory firm, predicts that by 2027, electric vehicles (EVs) will be cheaper to produce than gas-powered automobiles. The cost of producing electric vehicles is predicted to fall, whereas the cost of producing gasoline-powered vehicles is expected to rise due to variables such as rising oil prices. This shift in cost structure may result in increasing EV adoption and a decrease in production of traditional gas-powered automobiles.
In 2024, automakers will continue to wrestle with shifts caused by software and electrification’s increasing roles creating a new phase for electric vehicles (EVs), according to Gartner, Inc.
“New OEM incumbents want to heavily redefine the status quo in automotive,” said Pedro Pacheco, Vice President of Research at Gartner. “They brought new innovations that simplify production costs such as centralized vehicle architecture or the introduction of gigacastings that help reduce manufacturing cost and assembly time, which legacy automakers had no choice to adopt to survive.”
As OEMs move on to disruptively transform their manufacturing operations in tandem with product design. The coming years will see BEV production costs drop considerably faster than battery costs. “This means BEVs will reach ICE cost parity much faster than initially expected. At the same time, it will make some repairs of BEVs considerably costlier,” said Pacheco.
New Tech Makes EVs Costlier to Repair
Gartner predicts that by 2027, the average cost of an EV body and battery serious accident repair will increase by 30%. As a result, vehicles suffering a collision may be more prone to a total write-off. This occurs when the repair could cost more than its residual value. More expensive crash repairs may lead to more expensive insurance premiums. Equally, they could result in the refusal of insurance companies to cover particular car models.
Gartner says the fast reduction of BEV production costs should not be done at the expense of higher repair costs. This may generate consumer backlash in the long run. New ways to produce a BEV must only be deployed together with processes to ensure low repair costs.
EV Startup Consolidation
“Many startups gathered into the EV space, from automakers to EV charging. Some are still heavily dependent on external funding, leaving them particularly exposed to market challenges,” said Pacheco. “In addition, different countries are progressively phasing out EV-related incentives, which presents a more challenging market for incumbents.”
By 2027, Gartner predicts that acquiring or bankrupting 15% of EV companies founded since the last decade. “This does not mean the EV sector is crumbling. It is simply entering a new phase where companies with the best products and services will win over the remaining,” said Pacheco.
EVs will continue growing market penetration in 2024. Gartner estimates EV shipments will reach 18.4 million units in 2024 and 20.6 million units in 2025. However, we are moving from ‘gold rush’ to ‘survival of the fittest’. Companies in this space heavily rely on certain conditions for their success. Their capabilities to respond to the needs of early mainstream EV adopters are crucial.
