White paper
Evaluating electric vehicle costs and benefits in China in the 2020–2035 time frame
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The pace of vehicle electrification in China and globally hinges on how quickly electric vehicle costs decline. With this paper, the authors combine the best available battery and vehicle component cost data in a bottom-up analysis to project electric vehicle costs in China from 2020 through 2035, and then evaluate when electric vehicles could reach price parity with conventional vehicles. This study includes full battery electric vehicles and plug-in hybrid electric vehicles, and assesses costs for various vehicle classes in the China passenger vehicle market, including cars and sport utility vehicles. Electric vehicle subsidies and tax advantages are deliberately excluded to provide a technology-neutral comparison of the costs and benefits.
Results show that electric vehicle initial price parity is likely to be achieved in 5–10 years in China. As the figure below illustrates, price parity with conventional cars and sport utility vehicles is likely to occur between 2026 and 2029 for mainstream battery electric vehicles with 300–400 kilometer (km) range. Shorter-range (250 km) electric vehicles reach parity faster, by 2025, but require more charging infrastructure, and for longer-range (500 km) vehicles, parity occurs in 2030 or later. Results also show cost-competitiveness for electric vehicle buyers in China is reached several years faster than initial vehicle price parity, based primarily on electric vehicles’ fuel savings. In further considering the full vehicle lifetime effects through a broad transition to 90% new electric vehicle sales by 2035, larger cost savings can be experienced widely across drivers in China. Compared to China’s current electrification targets, accelerating the electric transition over new 2024–2035 vehicles could result in approximately $445 billion (¥ 3 trillion) greater benefits.
Despite clarity on declining electric vehicle costs and their benefits, the transition to all electric vehicles will not happen without sustained policy. Clear targets from the central government can spur many aligned government and industry actions. Longer-term regulations like new energy vehicle regulation and performance standards are especially necessary to ensure industry investments, high-volume electric production, and broad electric model availability.
