Working Paper

Assessment of light-duty electric vehicle costs in Canada in the 2023 to 2040 time frame

With Canada poised to require that all sales of passenger light-duty vehicles be zero-emission by 2035, this paper examines the costs of producing zero-emission vehicles (ZEVs) compared to internal combustion engine vehicles (ICEVs). The primary emphasis is on the powertrain, specifically the battery and electric drive components, as major contributors to ZEV production costs. The study aims to provide detailed Canada-specific cost breakdowns of ZEV powertrains across various vehicle classes and estimate how these costs will evolve over the next two decades.

The analysis outlines different scenarios for when ZEVs will reach upfront cost parity with ICEVs, considering factors such as battery costs, inflation, and raw material prices. In the baseline scenario, ZEVs are projected to achieve upfront cost parity with ICEVs by 2035 for certain vehicle segments. In a more pessimistic scenario, luxury segments may not reach parity by 2040. An optimistic scenario envisions cost parity across all classes and segments by 2040, with some achieving it by 2035. The analysis also highlights the impact of indirect overhead cost assumptions on the timing of total original equipment manufacturer (OEM) cost parity.

Notably, the analysis shows that plug-in hybrid electric vehicles (PHEVs) will not reach cost parity with ICEVs in any overlapping classes or segments. The paper notes that additional measures, apart from government subsidies, may help hasten cost parity, including the adoption of advanced battery technology and increased government support for charging infrastructure.