Electric vehicles | Competition will eventually drive prices down

Three years before the end of Quebec subsidies to buyers of electric vehicles, the road to price parity with combustion models remains long, according to the International Energy Agency (IEA). The good news for consumers: intensifying competition in electrification is forcing manufacturers to reduce their profit margins.

This is one of the findings made by the international organization in its most recent projections, released on Tuesday. Its 175-page report estimates in particular that half of the cars sold worldwide in 2035 could be powered by electricity.

There is, however, one condition sine qua non to achieve this: more affordable models. In North America, and more particularly in the United States, we will potentially have to wait until 2030 to see price parity between electric sport utility vehicles (SUVs) and those powered by gasoline.

“Smaller and less expensive electric models still have a longer way to go,” underlines the Agency’s report. In 2022, only 5% of electric cars sold in the United States were less expensive than their internal combustion engine equivalent. »

Everything indicates, according to the report’s forecasts, that there will always be a price gap between an electric model and its comparable combustion version when the Roulez vert program – which offers up to $7,000 for a new electric vehicle – is gradually sent to the scrapyard by Quebec, in 2027. The federal government continues to offer up to $5,000 for an electric model until 2027, but there is no guarantee thereafter.

This is nothing to reassure consumers, who, according to a recent consultation conducted by the online sales platform AutoHebdo, place the higher purchase cost among the main obstacles to purchasing a zero-emission vehicle (ZEV). ).

Read “Price and autonomy concern consumers”

Hope

There is, however, a glimmer of hope on the horizon, according to the IEA’s findings. Slowly but surely, the arrival of new models fuels competition and forces manufacturers to adapt. The report gives the example of Tesla and its Model Y in the United States. Between 2022 and 2024, the sale price increased from a range of US$65,000 to US$70,000 to a range of US$45,000 to US$55,000.

“This suggests that there is a profit margin even if the price is lower,” one writes.

For the President and CEO of Electric Mobility Canada, Daniel Breton, one element could accelerate the reaching of the parity zone in terms of prices: a boost in the offer of “entry-level” electric models » – around $35,000.

“After a growing offering of larger, more expensive vehicles, we are starting to see Hyundai, Kia, Volkswagen and others preparing to offer smaller, less expensive models within two to four years. This is when the situation will change. »

The automotive giants still have work to do in this area. According to the Drive Electric campaign, there are currently four models (Fiat 500e RED, Bolt EV and Bolt EUV as well as Nissan Leaf) at a price of approximately $35,000 – including eligible subsidies.

Still challenges

In the American market, only 5 of the 25 new models expected this year sell for less than US$50,000. None can be found for less than US$30,000, according to the IEA. This means, writes the organization, that “few electric models compete directly with combustion models”. The document does not look at the Canadian market.

At the Association of Electric Vehicles of Quebec, we estimate that it is “very difficult” to predict the average prices of electric models when Roulez vert has disappeared. There is, however, one certainty, according to its spokesperson, Simon-Pierre Rioux: “The price of gasoline vehicles will also continue to increase. The price of a liter of fuel is likely to continue to rise, which will have an impact on the overall cost of this type of vehicle. »

Popular, Roulez vert was costing taxpayers more and more. In 2022-2023, 238 million had been distributed to buyers. Last year, the bill for the program reached around 400 million. The Legault government justified its decision by asserting that the electric vehicle market could now stand on its own two feet.