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Published date: June 28, 2024

The Future of Electric Vehicle Adoption: Why the Price Gap is Closing Fast

The Future of Electric Vehicle Adoption: Why the Price Gap is Closing Fast

A new EV adoption study conducted by Cox Automotive shows that the price gap between a gas car and an electric car in the last two years has contracted drastically. This is a strong signal that the future of EVs is much brighter than many people think.

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Cox Automotive just released an exciting new study The Path to EV Adoption, revealing a significant shift in the automotive market. In 2022, the price gap between a gas car and an electric vehicle was a staggering $17,500. Now, in 2024, only two years later, that gap has narrowed to just $5,000. This rapid change suggests that by 2026, EVs could reach the sticker price parity with gas cars, revolutionizing the automotive industry.

Numbers showing that the approximate price gap between new EV vs new ICE vehicle being $17,500 in 2022 and $5,000 in 2024.

At Lectrium, we've been at the forefront of educating EV shoppers, dealerships, and enthusiasts about the financial benefits of owning an electric car. Our products demonstrate that, for many, EVs are already cheaper to own than a gas car alternative. Let’s look ahead and explore the economic principles that will shape the future of electric vehicles.

The power of economies of scale

The U.S. currently produces and sells between 13 to 16 million new cars annually, with EVs comprising just 8-10% of this total. Take Ford, for example. They manufacture more than 2 million gas cars and around 24,000 electric vehicles annually.

Due to the power of economies of scale, as EV production scales up, the cost per unit decreases. Imagine what happens when major manufacturers like General Motors, Ford, and Toyota start producing 200,000, 500,000, or even 1 million EVs each year. As EV production ramps up and the demand for gas car parts decreases, the cost of gas cars will rise while EV prices will drop. This shift will make EVs even more attractive to consumers.

What are the implications of increased EV production?

  1. Longer Range EVs: As the cost to produce EVs drops, manufacturers can afford to install larger batteries. This could double the current average range of 250-300 miles to 500-600 miles within the next five to seven years. Imagine a $40,000 car that can travel 600 miles on a single charge—this would be a game-changer!
  2. Dealership Motivation: With higher profit margins on EVs, dealerships will be more motivated to sell them. This shift in focus will accelerate the adoption of electric cars as dealers push them to customers more aggressively. Get ready for EV-only franchise dealerships.
  3. Cheaper EVs: As EV production scales up and costs come down, EVs will become as cheap, and even significantly cheaper than gas cars. This price reduction will create a snowball effect, making EVs the default choice for new car buyers.
  4. Cheaper ownership: Today an average EV owner can save up to $1,100 a year in fuel costs compared to driving a gas car. With a decrease in gas cars on the road, you can expect gas prices to start climbing. Every person switching from gas to EV will contribute to reduced demand for gas, making it even more attractive to switch.

All these factors combined can potentially create a massive snowball effect for EV adoption.

The EV tipping point

We could soon reach a tipping point where the early majority begins to adopt EVs en masse. When this happens, the industry will see a rapid transformation.

Imagine it is 2032, and you are considering buying a new car. If every second car sold is electric, and you have witnessed the rise in EV demand, would you still consider a gas car? By then, the resale value of a gas car will plummet as the market shifts overwhelmingly towards electric vehicles. Dealerships will focus on EVs, service centers will cater to them, and the cost of maintaining a gas car will soar.

In this future, owning a gas car could mean facing high maintenance costs and difficulty finding a buyer when you are ready to sell. The value of used gas cars could drop to the bottom as the market becomes saturated with affordable, long-range EVs.

Emerging the EV transition a champion

The rapid closing of the price gap between gas cars and electric vehicles signals a bright future for EV adoption. With economies of scale driving down costs, enabling longer ranges, and increased dealership support, the shift to electric is inevitable. As we look to the future, it is clear that the time to step up, and embrace EVs at dealerships has come.

Lectrium is ready to become the dealership EV-partner of choice, and make sure that auto dealers come out of this transition a champion. If you are a dealership interested in selling more EVs and learning more about our offerings, book a demo with Lectrium here.

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