Electric vehicles: When will EVs become more affordable

The age of the affordable EV will only begin when they appear in large numbers on the used car market.

Battery electric vehicles are falling in price. In recent weeks three new Chinese models have gone on sale here below $40,000 (plus on road costs), making them substantially cheaper than earlier offerings.

By comparison, however, there are at least three petrol cars priced under $20,000, as well as scores of other internal combustion options for less than the cheapest battery EV.

The MG4, one of three new EVs below $40,000.

For most, the age of the affordable battery EV will only begin when they appear in large numbers on the used car market. At the moment, however, the Electric Vehicle Council estimates that only about 1 per cent of second-hand cars advertised on the country’s biggest site, carsales.com.au, are EVs.

Natalie Thompson, senior manager of policy at the council (the local industry’s peak body), estimates by the end of the year there will be likely 140,000 to 150,000 pure EVs on Australian roads.

The healthy recent increase in uptake of battery EVs – they accounted for 7 per cent of the new car market in July – is driven in part by fleets and businesses taking advantage of fringe benefit tax concessions.

“Given the existing timelines that fleet operators tend to operate under,” says Thompson, “within the next three to five years a significant proportion of these company vehicles will be hitting the second-hand market and obviously increasing the availability of used vehicles for consumers as well.”

Thompson says she expects this will be backed up by additional lower-priced new models coming onto the market, and furthered by improvements in battery technology. “The rise of LFP [lithium-ferrophosphate] batteries in a lot of models coming to Australia is improving the affordability because they’re cheaper to produce than NMC [lithium-nickel-manganese-cobalt-oxide] batteries.

“And sodium-ion is showing up in China in a few vehicles potentially in the next few months as well. So I think that will be interesting.”

These sodium batteries are bulkier than lithium ones – at this stage of their development – but use salt, which is plentiful, rather than expensive lithium. They promise certain advantages such as better range in cold weather.

However, Thompson says it’s the fuel efficiency standards promised by the federal government that will have the most effect on supply and, by extension, affordability. Currently, Australia has no legally enforced standards on combustion engines and is a dumping ground for older engine technology.

Inside the GWM Ora electric car.

Brands that have both petrol and battery EV models tend to send their cars to markets that penalise companies that do not meet a corporate average fuel economy or emissions standard. Volkswagen, for example, hasn’t launched any of its big-selling, relatively affordable, ID battery models on this market.

Audi too has held back its small SUV, the Q4 e-tron, exacerbating a situation where buyers wanting to go electric still need to pay a healthy premium even in the prestige part of the market.

The federal government says it will release its preferred model and an exposure draft of legislation by the end of this year.

“This will play a really important role,” says Thompson, “because obviously, we’re not being prioritised for a number of different models at the moment … and we need to have that regulatory incentive in place.”

If we have more access to new models, we may be able to take full advantage of a price war that is breaking out among EV makers overseas. In the United States, maker Lucid Motors has reduced the price of its acclaimed Air luxury sedan by as much as $US12,400 ($19,200) in response to Tesla’s price cuts. Tesla is chasing volume and even in the country that produces most of the world’s BEVs, China, it has forced local makers to cut the price of some of their electric models below petrol equivalents.

As if to illustrate the shortage on the second-hand market here, Eevee Auctions, set up by Slattery Auctions to sell used hybrids and electric vehicles, had not a single pure battery EV on offer when we visited the site a couple of weeks ago.

An EV-only alternative, the Good Car Co, imports out of Japan and the UK, because local used stock is so rare. It lists about 70 vehicles, but at this stage mostly older and less loved models, such as the Nissan Leaf, and the early Hyundai Ioniqs. Many have small batteries; a 2014 Nissan Leaf (offered at $18,000) lists the range between charges as “89-111 km”, making it unsuitable for most buyers.

Fortunately, that isn’t the main focus of the business. Based in Tasmania but operating nationally, The Good Car Co describes itself as a community organisation. It was started by three environmental scientists with the aim of aiding the transition to a sustainable future. It donates 50 per cent of its profits to climate-related causes.

Anthony Broese van Groenou, The Good Car Co’s director, says the company has noticed a slight drop in used prices recently, particularly from those heady pandemic days when near-new EVs were being resold at a big markup. Broese van Groenou cites buyer hesitancy as one reason. “There’s been a lot of scare campaigns about the longevity of batteries. It’s such a furphy. The rate of degradation is really minimal compared to the initial hubbub around it.

“But I think when people are making their decisions around a second-hand vehicle they are concerned because we don’t really have any standards in place to test and diagnose and give accurate reports as to what that battery is going to be like and the longevity of it.”

Broese van Groenou says confidence is building, along with the knowledge that EVs require far less maintenance over the long term, making them potentially less risky as a second-hand purchase. “One of the potential downfalls of policies like this FBT exemption – which is great, you virtually get a half-price BEV and that really spurs fleet uptake – is that it makes it harder for everyday people get access.

“But it will eventually result in a lot more affordable electric vehicles.”

The Good Car Co company is investigating another way of reducing the barriers to entering the market: aftermarket upgrades. It recently fitted an older EV with a new battery pack from China. Broese van Groenou says the cost, at a commercial retail rate, is likely to be about $12,000 per car, and could increase the range from “120 ks up to 450 to 500 kilometres.”

“There’s the additional value of the older battery. Even if it’s one that only gives a range of 110 or 120 km, it still has a good 10 to 15 years of usable life as stationary storage.” He says such a battery will likely have about 15 kWh of usable capacity. “That’s more than a Tesla Powerwall, and virtually free.”

Broese van Groenou believe there are a huge number of variables that will determine the price of EVs over the next few years, including the supply of new and second-hand vehicles, government policy, and the availability of bidirectional power which could enable people to use their parked car as a power source in peak times, and recharge off-peak, or when solar is available. This is being trialled in Australia, and could make battery EVs even more desirable.

“We don’t know what that fuel efficiency standards are yet, but that should have a pretty significant impact on the appetite of [car manufacturers] to service the Australian market.”

There are state incentives for BEVs in much of Australia and according to The Good Car Co calculations, even with finance or leasing, we are already at cost parity between BEV and petrol, as long as you look at the “whole of life” costs.

“In quite a lot of scenarios that’s true even between say a Tesla and a Corolla even though there’s a higher up-front cost,” says Broese van Groenou. “After operating that vehicle at much lower operating cost, it reaches that cost parity within four or five years.”

Meanwhile, at the very top end of the market, EVs are making strong progress. There is high buyer demand, and it is easier to disguise the cost of the batteries (by far the most expensive part of a EV) in an expensive luxury car. Rolls-Royce has shown its battery-powered Spectre coupe, due here later this year, while Porsche’s Taycan and BMW’s i7 fit into their respective company’s model line-ups without carrying an obvious price premium.

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