Electric vehicles (EV) are finally starting to become more affordable, with one such example being the new Volvo EX30.
The EX30 is a new-generation EV that recently became available from a starting price of R775,900.
Yes, this is expensive, but it’s much less so than the XC40 P6, an older, slightly less-advanced EV from the same manufacturer that retails from R1,075,000 which just one year ago was touted as being the most affordable electric SUV in South Africa.
“We have often spoken about EVs moving closer and closer to the internal-combustion engine (ICE) equivalent in terms of pricing. This is what we have tried to deliver with the EX30,” said Volvo Car South Africa Managing Director Greg Maruszewski.
This R300,000 price difference came despite the EX30 offering a newer and more sophisticated powertrain and features than the XC40, being the first sign that EVs are, in fact, becoming cheaper as technologies progress – just like the oracles foretold.
Another example from local soil, the Mercedes-Benz EQE in January 2023 was estimated to retail from R1,800,000.
When it finally went on sale at the end of June after months of interest rate hikes and inflation, the R1,642,000 starting price for the luxury sedan, R158,000 lower than what was anticipated, grabbed headlines.
We recently also got wind that the new GWM Ora Cat electric hatchback will be arriving on local shores soon from a starting price of R716,900.
This means at the end of 2023, South Africa will have three EVs within the R700,000-to-R800,000 price bracket including the Mini Cooper SE, which as little as four years ago was completely unheard of.
What’s happening with EV prices
The main input in EV price structures is the battery which accounts for over 30% of the window sticker, with import costs also playing a significant role, especially in South Africa where EVs and their related components are taxed 7% higher than ICEs.
When deciding what it would price the EX30 in our market, Maruszewski said Volvo considered “the cost to produce the car” which is largely dependent on its battery, “plus the relevant import costs” which are inflated by the locally-specific import duties.
Nevermind these taxes, the prices of lithium-ion batteries have seen a substantial reduction of over 90% since 2008 when most manufacturers started dabbling in EVs, according to research by the US Department of Energy.
Over the same time, energy density in these battery modules has nearly tripled as advancements in design and technologies were made.
The first wave of battery improvements, which was installed in second-generation EVs like the XC40, used these advancements to increase driving range and charging speeds, with the average range of most EVs going from under 300km to over 400km from one to the next generation regardless of manufacturer.
Now with third-generation EVs like the EX30, we are starting to see the benefits of lower battery costs in price, too.
It seems that most carmakers have settled on roughly 400km of range for their entry-level EVs and will now focus on reducing prices to outshine competitors and get them into the hands of the wider public.
On the topic of its relatively low price, Maruszewski said Volvo “mostly” tried to “position the [EX30] to be competitive within our identified range of competitors” – hinting that the new barrier to entry EV producers is targeting is around R700,000, as opposed to the R1 million-plus from earlier this year.
What has also buoyed EV asking prices until now was the luxurious features and materials many of these manufacturers installed into the vehicles, as it would be impossible to justify a car with no touchscreen or buttons on the steering wheel, but that still costs millions just because it has a “new-energy” powertrain and makes no sound.
Luckily, with EV underpinnings becoming cheaper to produce and their designs more versatile, they can now be integrated into many more lower-end models.
In Europe, Renault (aka Dacia) has grabbed the opportunity to get in on the ground floor of the affordable EV race, recently unveiling an all-electric version of the popular Kwid badged the “Spring” that will hit the market in 2024 at around R350,000.
A year ago, a sub-R400,000 EV from a major manufacturer anywhere in the world was but a pipe dream. Now, it’s a reality, even if not in South Africa.
Of course, early EV prices also had to account for the setting up of factories and wide-reaching market research, plenty of capital which has by now been recouped in one way or another.
The motors themselves had to be enhanced over the years, too, but they were nowhere near as rudimentary as car batteries were back in 2008.
While research and development costs will always remain part of the game, and therefore, price tags, they are not as risky as they were a decade ago and are continually being spread across a wider variety of models in different segments to reduce their impact on one specific one.
2024 Dacia Spring EV
Where EV prices will go from here
While a downtrend in EV pricing is certainly welcome, it’s not going to last forever, and it will be unlikely that they will ever be priced lower than their ICE counterparts.
Still, they will become cheaper, at least until they reach the same price levels as petrol and diesel autos.
“We think the price of EVs and ICE cars will draw closer and closer together over the next few years as the technology matures and economies of scale allow for that trend,” said Maruszewski.
“Much depends on the cost of raw materials specific to EVs, such as lithium, cobalt, etc. However, we think irrespective of the prices of ICE cars (these could increase due to local factors like currency, taxes, etc.), the trend will be for ICE and EVs to draw closer and closer together, with similar specifications/segments and so on.”
BMW EV battery factory
It’s somewhat of a chicken-and-egg situation, though.
More and more EVs must get into the hands of the public, in order for more and more manufacturers and third parties to develop cheaper cars and easily-accessible infrastructure.
In South Africa specifically, Maruszewski noted that the vast distances between cities and the lacking infrastructure have hampered EV adoption rates.
“The distance issue will be solved with the next generation of batteries in a few years, where the range will increase and charging times decrease,” said the head of Volvo Car South Africa.
“Infrastructure will also develop with the increased demand for EVs. Indeed, there are investors waiting to develop that infrastructure; they just need to know the demand curve.”
As this plays out, EVs are expected to slowly integrate into all corners of the market and not just be relegated to the premium segment, and it’s very possible that one day you’ll be choosing between a hybrid or fully-electric model in the same price range, rather than a petrol or diesel.
Keyword: Electric cars are getting cheaper – Here’s the situation in South Africa