Why are electric cars so expensive? Electric cars today

Cars used to be a luxury when they first came out. Nowadays, they are a necessity for an individual's daily routine. Because they are not a removable need, many manufacturers come up with new models with new features. Different each year to offer utmost comfort to its users.

The latest at the moment is electric cars.

Are electric cars really more expensive? If they are more expensive than standard cars, why do people buy them? High-cost EVs are in demand for many reasons. In this article, we'll talk about electric cars, battery technology, and cost inclusions.

Electric cars vs diesel cars: what is the typical total cost?

Electric vehicles, also known as EVs, have become more popular since companies introduced their capabilities to the public. The main difference between these cars versus traditional ones is that EVs use a battery pack to power an electric motor instead of an internal combustion engine (ICE). EVs come in three varieties, Hybrid Electric Vehicles (HEVs) , Plug-In Hybrid Electric Vehicles (PHEVs), and Battery Electric Vehicles (BEVs).

According to statistics, plug-in electric motor car sales increased by 140% from year to year. EVs even accounted for 10% of car registrations in 2020. Because of their continuous harmful effects on the environment and with constant research backing the decision, the UK decided to ban both petrol and diesel engines by 2030. It even allocated a £20m fund to support EVs.

How expensive are electric cars?

Below is a Table comparing characteristics and costs of standard and electric cars:

While EVs have many benefits, the only negative side is that you will have to pay extra to go green. Based on the table above, standard 5-seater cars are much cheaper than electric cars in terms of their cost, annual insurance, and maintenance. However, electric vehicles such as the Tesla M3 SR and Kia e-Niro are exempted from Vehicle Excise Duty.

Reasons why EVs are more expensive than diesel-powered cars

It's a well-known fact that getting a new car often comes at a high price. Choosing electric vehicles comes at a much higher cost, but it's not just because of the electric car battery.

An EV needs to have almost the same components as a standard car. Although they are fewer, they are of high quality and thus, not cheap. Supply chain and high demand are also factors as to why this type of vehicle is expensive.

Below are some of the reasons that significantly affect the price tag of an EV:

1. Battery technology comes at a high cost

Because technology keeps on changing and improving, batteries used on the first electric cars needed to be updated. Today, there are two types of batteries available on the market: disposable and rechargeable.

Disposable ones are zinc-carbon and alkaline batteries. This type of battery is not designed to and is not safe to recharge.

Rechargeable batteries are NiCd, NiMH, and Li-ion, which are used to power mobile phones, laptops, power banks, and electric motor cars. A lithium-ion battery is used on vehicles to provide electricity without fossil fuels. A lithium-ion battery costs about £6,000 ($8,000), almost 33.33% of an electric car's total cost.

This electric car battery is essential for the cathode. This is the component responsible for storing and releasing battery power in the vehicle.

Manufacturers are aiming to lower the price to make electric cars more affordable by replacing some high-cost materials on the cathode with cheaper alternatives.

2. Cars using an all-electric motor are still new to the market

More and more people are becoming aware of how harmful fossil fuels emitted by vehicles are to health and the environment, increasing the demand for electric cars.

But since the market is new and the scope of these cars is limited, the price point of electric vehicles is still a challenge for companies to control their supply, making it difficult to cater to their customers.

3. Limited electric car supply doesn't meet the high demand in the market

Many are still reluctant to use electric vehicles because they are powered only by batteries. EVs take time to charge, which can be off-putting, and components are very high tech, leading to a high repair cost. In terms of driving range, traditional vehicles are still better than electric ones, as petrol stations allow drivers to refuel in a matter of minutes.

The Asia Pacific has the largest market share of electric cars, followed by Europe and America. Due to the continued impact of fuel gas on the environment, greater demand for EVs is expected in the coming years.

Because the ratio of people wanting to buy an electric vehicle is greater than the available manufacturers, the materials and machinery required affect the speed of manufacturing, consequently impacting price. The manufacturing of lithium-ion batteries, for example, takes 18 months in total. If manufacturers don't come up with other ways to speed up manufacturing, the price tag of electric vehicles will continue to increase.

4. Electric car servicing and maintenance cost

Whether you use a standard or electric vehicle or not, visiting a service station for car maintenance and repair will not be cheap. The usual things to be repaired in electric car models are batteries, electric motors, brakes, tires, cabling, suspension, and lights.

On the other hand, traditional vehicles need to change oil every 3,000 miles. This includes changing parts such as the air filter, battery, radiator, and even engine check and wheel alignment.

What makes electric vehicle service expensive is the technology involved in its maintenance and repair. It will also depend on the specific issue that needs to be fixed.

You may want to read it - Do Electric Cars Need an MOT?

5. The electric car belongs to a higher car insurance group

The insurance group is the panel that decides the right amount of insurance a car needs. They generally base their decisions on the car's value, possible repair cost, and the total cost of making the vehicle.

Since electric cars need a lot of money to cover these factors, it is not surprising that EVs are in the higher insurance group. Based on the comparison table above, a standard Audi A6 average insurance cost is only £960.83 per year. This is half the cost of a Tesla Model 3 SR at £2,718.

However, many insurance companies offer car insurance. Take your time and compare their offers to find what's right for you.

6. Electric cars are exempted from road tax

Electric car tax is another encouraging reason to buy EVs. Because of car tax changes in April 2020, also referred to as the Vehicle Excise Duty (VED), your vehicle tax will depend on its level of emissions in the first year on the road based on WLTP standards.

Electric cars like Tesla Model 3 SR and Kia e-Niro were exempted from VED following these rules. It is because fully electric vehicles have zero-emission compared to cars that use petrol or diesel. There are also car companies that allow tax credits to their customers.

7. Hybrid cars have better fuel economy

A car that uses fuel and batteries to power the car is called a hybrid car. Plug-in hybrid electric vehicles (PHEVs) are 20% more expensive than a standard car but cheaper than all-electric cars. It is because hybrids were introduced to the market much earlier than EVs, and their supply is not limited.

Hybrids offer the best fuel economy among all types of cars as these vehicles use 30% less fuel than standard cars. They help drivers and owners to save money on fuel costs. Using the table above, a Mazda 3 incurs an average of £1,230.45 in fuel cost. A hybrid can save you up to £370 annually. However, for hybrids, ICE and electric power should work together, which means you will still need enough energy stored in batteries.

8. Cost to charge an electric motor per kilowatt (kw)

The cost of charging an electric vehicle depends on the location of charging points and the charge point network. Charging cost on public charging infrastructure depends on power rating speed for a car to be fully charged, such as slow (8-10 hours charging), fast (3-4 hours charging), or rapid (30-60 minutes charging).

A rapid public charge point costs 23 – 24p/kWh with an average of £6 - £7 for 30 minutes of charging for 100 miles of travel. If you want to save money, you can recharge your car at home, and it will be included in your electricity bill. You may need to install a charging unit. It cost about £1,000, but you can get a discount with the OZEV grant.

You may want to read it - How to charge your electric car at home

9. Fast and easy financing for an electric car

The base price of BMW 330e is £32,220, which is already a sticker price of a mid-range standard car. It's a reasonable price tag for each electric model car.

EVs are expensive, but that extra cost to go green helps preserve the future.

If you want to own an electric car, but it is out of your budget, you can apply for car financing. Carplus will help you get the vehicle that you want without worrying about your credit score. Getting car finance may also help you with tax credit and other grants available for each car to get a lower price.

10. Upfront cost in getting evs

If you plan to buy an EV, keep in mind that you don't need to buy the latest electric model in a higher range because of battery capacity. The upfront cost of an electric motor vehicle is higher than a petrol or diesel one, and there are also increased costs in terms of insurance and repairs. Since the supply is not meeting the high demand, the high price point of EVs will stay for a while.

But it doesn't mean you can't buy EVs because of their high upfront cost. Knowing your basic preferences such as driving range, the number of seats, fuel economy, and car battery life will help you choose the right electric car for you. To help with the upfront cost or in installing a home charging point, search for government grants and car finances available.

You may want to read - How Much Does It Cost to Charge an Electric Car?

11. The resale value of an electric motor vehicle

Secondhand EV prices used to depreciate faster than their petrol or diesel counterparts. The resale value of some EV models used to drop to 17% of the original price tag after three years. Fortunately, it has changed now, and the value has become more comparable with standard cars.

Tesla, for example, managed to retain 56% of its original base price after three years and 30,000 miles. It is because the market trusts the brand and the high-quality cars they produce.

Summary: Will electric cars go cheaper in the UK?

Electric vehicles are considered a high-value investment due to their numerous benefits, including their eco-friendliness and lower running costs. According to Forbes, by 2027, petrol and diesel engine cars will be more expensive than electric cars, making it a sensible decision to invest in an EV.

Although the price of electric cars in the UK is currently high due to limited supply of electric motors, car batteries, and other valuable materials, the government and manufacturers are working towards making EVs more affordable. This includes offering tax credits, finance options, and grants to make charging station costs and upfront costs more accessible to consumers.

It is difficult to predict with certainty whether electric cars will become cheaper in the UK, as this will depend on various factors, such as the rate of technological advancements, government incentives, and market demand. However, with electric vehicle technology advancing rapidly and becoming more mainstream, there is a possibility that prices may decrease in the future due to economies of scale and increased competition among manufacturers.

Overall, choosing to invest in an electric vehicle can be a smart decision, both financially and environmentally. While the initial cost may be high, the long-term benefits and lower running costs make it a worthwhile investment.