Electric vehicles to be more cost effective than diesel or gas by 2020s

New research from Bloomberg New Energy Finance has predicted a bright future for electric vehicles, with reductions in the price of batteries meaning EVs could become a more economical solution than either gas or diesel.

In 2015, it was estimated that there were 462,000 EV sales - 60% more than the previous year. The new study predicted that by 2040 the sale of electric vehicles would be 90 times that amount - 41 million new vehicles  - and account for 35% of new light duty vehicle sales.

Around 1.3 million EVs have been sold worldwide to date, but despite this, and despite the strong growth of the 2015 market, they still accounted for less than 1% of light duty vehicle sales. This may be attributed to the fact that the market is heavily dependent on environmentally aware “early adopters” and government incentives in countries such as China, Netherlands and Norway.

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There are two kinds of EVs available: plug-in hybrid electric vehicles, - PHEVs, which have a backup conventional engine - and battery electric vehicles, or BEVs. BEVs, which rely entirely on their batteries to provide power, are predicted to become cheaper than internal combustion engine cars by the mid-2020s.

Lead advanced transportation analyst at Bloomberg New Energy Finance, Colin McKerracher, said that the dropping price of EV batteries was at the core of the study’s predictions. “Lithium-ion battery costs have already dropped by 65% since 2010, reaching $350 per kWh last year. We expect EV battery costs to be well below $120 per kWh by 2030, and to fall further after that as new chemistries come in,” he said.

Even if traditional internal combustion engine cars continued to improve their mileage by 3.5% a year, the new long-range and affordable BEVs are expected to be more cost effective. These new BEVs will travel around 322 km between charges on a 60kWh battery and are set to hit the market within the next 18 months.

The study’s cost analysis was based on “the crude oil price recovering to $50, and then trending back up to $70-a-barrel or higher by 2040,” said Salim Morsy, senior analyst and author of the study. However, the predicted economic viability of EVs won’t rely on recovering oil prices - Salim said that even “if the oil price were to fall to $20 and stick there, this would only delay mass adoption of EVs to the early 2030s.”

Above and beyond oil prices, Mozo’s data showed that taking an environmentally sound route to car purchases could also secure drivers a better deal on a car loan. For instance, Victoria Teachers Mutual Bank offers a Green Car Loan with an interest rate of just 5.29% for those that purchase a new car that has a C02 value of 180 g/km or less.

Ready to snap up an environmentally friendly and money saving new vehicle? Check out our car loans comparison to set yourself on the right track.