Predicted 40 percent drop in EV battery cost could bring even cheaper electric vehicles by 2025: report

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How cheap can electric vehicles be, and will they reach price parity with combustion cars quicker than expected?

According to ABC News, there could be a pretty significant drop in the cost of batteries in 2025 when compared to 2022 figures. 

The Australian media outlet has reported on global investment bank Goldman Sachs’ predictions that prices for batteries will continue to fall by as much as 40 percent by 2025. 

According to Reuters, the battery of an electric car currently equates to roughly 40 percent of the total price of the vehicle. 

The Tesla Model 3, for instance, has a battery worth roughly $16,000 to $20,000 depending on sources, but a 40 percent drop could mean batteries come in at an estimated $10,000. 

Price parity between ICE and EV is still some way off

As of January 2024, the most affordable internal combustion vehicle on sale is the Kia Picanto small car that starts from $17,890 before on-road costs.

That’s $21,000 lower in outlay than the cheapest EV, the BYD Dolphin. 

But if you compare body style and size like for like, the closest the Dolphin can get to other combustion hatchbacks is the $32,210 Kia Cerato or the $31,490 Subaru Impreza. 

Although purely speculation, with the sheer volume of EV batteries now being produced, cheaper material costs, rapid-fire battery innovations and plenty of global demand, we could potentially see price parity between ICE and EV cars by around 2028. Maybe.  

How cheap are the cheapest of EVs and what else could be coming?

We’ve already seen the likes of MG and BYD get a little closer to price parity with ICE (internal-combustion) vehicles with the BYD Dolphin and its biggest current rival, the MG4. 

The BYD Dolphin currently starts from $38,890 before on-road costs, while the MG4 in base Excite 51 guise has recently seen a small $1000 price rise, and now starts from $39,990 before on-road costs. 

But is that the cheapest we will see electric vehicles? It’s unlikely.

It’s hard to tell at such an early stage how affordable EVs will become in the coming years, however the introduction of more EVs from competitive Chinese brands is almost certain. 

EV giant Tesla will eventually launch its more budget-focused Model 2 hatch. We’ve seen teasers and some faint information regarding this vehicle, but it is still yet to be confirmed. Crucially, it is also yet to be confirmed for the Australian right-hand drive market. 

Pricing for the Model 2 could start around the $40,000 range, considering it will easily find itself pressured by key Chinese automakers like MG and BYD. 

The top five most affordable electric vehicles you can buy in Australia

Accurate as of January 2024, these prices are before on-road costs.

1. BYD Dolphin Dynamic – $38,890
2. MG4 Excite 51 – $39,990
3. GWM Ora standard range – $39,990 
4. MG ZS EV Excite – $40,990
5. BYD Dolphin Premium – $44,890