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Electric Vehicles May Be Cheaper to Produce by 2027

Electric Vehicles May Be Cheaper to Produce by 2027

During the next few years, legacy and startup automakers will continue grappling with disruptions caused by the electric vehicle evolution. However, by 2027, many next-generation EVs will be cheaper to mass produce than comparable ICE vehicles, claims a new report by Gartner Inc.

“New OEM incumbents want to heavily redefine the status quo in automotive,” says 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.

“With the perceived promise of easy gains, many startups gathered into the EV space…and some are still heavily dependent on external funding, leaving them particularly exposed to market challenges,” explains Pacheco. “In addition, EV-related incentives are being progressively phased out in different countries, which makes the market more challenging for incumbents.”

By 2027, Pacheco believes that 15 percent of EV companies founded in the last decade will either be acquired or bankrupt. “This does not mean the EV sector is crumbling,” he points out. “It is simply entering a new phase where companies with the best products and services will win over the remaining.”

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,’” claims Pacheco. “This means the success of companies in this space is now heavily conditioned by their capabilities to respond to the needs of early mainstream EV adopters.

“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,” says Pacheco. “This means EVs will reach ICE cost parity much faster than initially expected, but at the same time, it will make some repairs of EVs considerably costlier.”

Gartner predicts that by 2027, the average cost of an EV body and battery serious accident repair will increase by 30 percent. As a result, vehicles suffering a collision may be more prone to a total write-off, as the repair could cost more than its residual value.

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