RMI predicts price parity for EVs globally by 2030
Sales demand peak has already passed. Soon ICE share of the overall mix is going to start falling, says thinktank
Electric cars are set to achieve price parity with ICE in all global markets by 2030, a new report from US thinktank RMI finds. And it suggests that, not only was the peak of demand for new ICE cars six years ago, but the overall number of ICE cars on the world’s roads is set to start to fall just a few years from now.
RMI sees exponential growth for BEV sales — with the report predicting that that they will reach a 62pc share of global new car sales by 2030, and an 86pc market share in its optimistic scenario.
Inversely, sales of new ICE cars have declined by 5pc pa on average since 2017, the report states, representing the total fall in sales from 86mn in 2017 to 65mn in 2022. In its base case, however, RMI predicts that ICE sales will rise marginally next year.
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And, by the middle of the decade, more ICEs will be scrapped than sold each year, according to its forecasts. Global scrappage rates are set to increase from 40-50mn/yr over the past decade towards 60-70mn/yr, according to consultancy BNEF, owing to increases in sales 15 years — the average life of a car — ago.
Thus, the overall fleet of combustion cars is about to peak as rising scrappage catches up with plateauing, then falling sales. And the global ICE car parque will be “in freefall” by 2030 is its arresting conclusion.
The report cites policy pressure as a major driver in this future BEV sales growth. Over half of the world’s car demand comes from the 21 countries with EV incentive legislation in place, it finds.
China is on course for 90pc EV sales by 2030, up from a third today, RMI projects. A growing number of markets on similar s-curves will hit up to 80pc market share by the same date, owing to a global “race for EV supremacy speed[ing] up”.
Furthermore, battery capacity buildout is on track. The report finds that battery companies are planning factories with enough capacity to produce 10TWh of batteries by 2030, to support automakers planning to build new capacity sufficient to produce 80mn BEVs per annum by 2030.
One of the report’s headline claim is that EVs will achieve sticker cost parity with ICE cars in all global markets by 2030. And this projection is ex-subsidy, confirms Kingsmill Bond, energy strategist at RMI and one of the report’s authors.
“In China they removed subsidies, [yet] prices fell, and we have reached price parity already,” says Bond. “Subsidies will naturally fall over time as costs fall.”
The finding is largely attributed to reductions in battery costs, since, according to RMI, battery prices will fall to $60-$90/kWh by 2030 — around half, at midpoint, of the 2022 average of $151/kWh – which it attributes to a widespread shift towards lithium iron phosphate (LFP) chemistries.
RMI cites data from consultancy Bloomberg NEF projecting price parity on EVs across different segments, with the earliest EVs to reach price parity being large cars and SUVs in Europe, as well as the small car segment of the Chinese market. But the RMI report argues that these projections are conservative because “manufacturers may be prepared to make lower margins to gain market share in the new technology”.
It cites as an example that “sticker price parity has already been reached in the Chinese car market, some two to three years before the BNEF data would imply”. That said, comparison with the Chinese market is perhaps not representative, owing to heavy lifting done by state subsidies to lower the costs of EVs.
The report highlights that “the best-selling EV in China in 2022 was the Saic Wuling Hongguang mini BEV, which costs about $5,000”. Whether that price, even with transport logistics and import tariffs added in, is achievable profitably in other markets, or indeed whether it is profitable even in China, seems debateable.
Nonetheless, for Europe, RMI sticks by prediction that, whereas BNEF sees e-SUVs reaching price parity with ICE by 2025, this is based on an assumption of higher profit margins than RMI predicts. And thus the thinktank reckons it may happen earlier.