A sign touting electric vehicles at the 2019 Canadian International Auto Show.
Price disparity can be a sticking point for consumers when deciding between an electric vehicle and one with an internal combustion engine. But if things play out as some industry experts predict, price gaps would narrow and be equal in about six years.
“From the vehicle economics, what we think, over the next six years, you would see the total cost of ownership parity between internal combustion engine and electric vehicles in North America,” said Akshay Singh, partner with Strategy&, during the presentation Impact of New Technologies in the Automotive Aftermarket at AAPEX 2021.
He authored a report by the same name as the presentation along with Carlos Thimann, director at Strategy&.
Price parity could be reached sooner in Europe and China because of higher fuel and vehicle maintenance costs.
And when price parity hits here, sales will pick up so long as one important factor falls into place. “That’s when probably we’ll see rapid adoption [of EVs], provided there’s enough investment in the EV infrastructure,” Singh said. “We believe that there will be, but that’s going to take some time — probably by 2030 you will see sufficient development of EV infrastructure.”
He and Thimann predict EV adoption will hit 20 per cent come 2030. That number could get as high as 25 per cent. These figures come in a little less than the 30 per cent figure other prognosticators have put up. And that’s well below the target of 50% from the U.S. President Joe Biden administration.
“I think that’s just too ambitious but we’ll see,” Singh said of Biden’s goal. “We think that because of the developments in the industry, how vehicle economics are trending, how the charging infrastructure has been.”
Akshay Singh, left, and Carlos Thimann of Strategy& present the report thei co-authored at AAPEX 2021
A 20 per cent penetration translates into just 6 per cent of the total car parc being electric. That means 94 per cent of all vehicles on the road 10 years from now will still be an ICE, Singh pointed out.
“Even if you extend it further, say, to 2040, when 65% of [sales] vehicles will be electric — and we believe that’s going to happen — even then, only 25% of the vehicles on the road will be an electric vehicle,” Singh said. “So even by 2040, 75% of vehicles on the road will be internal combustion engine vehicle, because it’s going to take you a long time to transition to electric vehicle unless government steps in to say, ‘OK, we want consumers to just get rid of their internal combustion engine vehicles.’”
At that point, governments may have to pay consumers to switch over. That’s an expensive proposition, one that Singh doesn’t see happening.
For the aftermarket, it will be a slow transition to working on EVs, but that doesn’t mean there isn’t the urgency to start preparing now.
“It’s going to take some time before the aftermarket converts to electric, but aftermarket companies need to be prepared for this transition,” Singh advised. “[They] probably need to think about how they make this investment because this transition is going to be slow, at least when it comes to the automotive aftermarket.”