Electric vehicles and gas-powered cars won’t cost the same soon, Mercedes says

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There isn’t a carmaker that hasn’t made the rounds of electrification. This is the direction the industry is heading, and if an automaker decides to snooze right now, it could very well lose. Still, that doesn’t mean it will be cheap.

In fact, it’s far from cheap for automakers and consumers. Talk with Road & Tracka Mercedes executive has revealed that even the most seasoned automakers believe that current battery technology and economics are simply not ready to provide a solution that is truly comparable, price-wise, with a traditional gasoline-powered vehicle.

At the heart of all electric cars is the battery. And while most people don’t know exactly how much it costs to replace one of these packs, they usually at least know that it isn’t cheap. Sure, the price gap between battery-powered and gasoline-powered technologies is narrowing, but it’s not there yet. And according to Mercedes Chief Technology Officer Markus Schäfer, that may not be any time soon.

“To come [a battery price of] 50 USD per kilowatt, which would lead to a cost base comparable to that of an ICE, I would say that is far from the case,” Schäfer told Road & Track. “I don’t see that with the chemistry we have today.”

That’s not to say that battery prices haven’t already come down a lot. In 2010, lithium-ion packs cost up to $1,100 per kilowatt hour, according to Bloomberg. Within a decade, the price fell to an industry average of $137 per kWh, a drop of about 89%; now that’s about 21% of the cost of building an EV. Bloomberg suggests that the average price of $100 per kWh should be reached in 2023, although some commercial packs in China have already been seen in the sub-$100 territory.

While it’s good to track the industry average battery manufacturing costs, it’s not necessarily a representation of where a particular automaker is at any given time, nor is it a figure agreed by all the financial research companies. Depending on who you ask, that industry average could be as high as $186 per kWh right now. Either way, the actual cost of manufacturing a battery is often a closely guarded secret among automakers. Even though Mercedes achieves the $100 per kWh average cited by Bloomberg next year, that’s still more than double what the manufacturer estimates to be internal combustion cost parity.

Schäfer says two of the biggest “crystal ball” factors at play are the cost of extracting raw materials and the global increase in demand for electric vehicles. The latter currently plays an important role in the ongoing lithium shortage in the world.

To complicate matters, the cost of almost everything else continues to rise, and the demand for the raw materials used in battery manufacturing is also rising alongside the production of electric vehicles. Keep in mind that Tesla’s long-promised (then killed off) $35,000 Model 3 would cost over $40,500 today when factoring in inflation.

The industry as a whole recognizes that the transition to electrification will be difficult. Stellantis CEO Carlos Tavares speaks frequently on this topic, and he also warned suppliers to prepare for the huge costs associated with electric vehicles.

Maybe these automakers are telling the truth. Is the era of the cheap car coming to an end? Or is this a key indicator that moving away from combustible fuels will take much longer than expected, meaning hybrids could be in the long run? Only time will tell, but if you ask Mercedes, that answer isn’t coming anytime soon.

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