Here's why electric cars are getting cheaper now

Carmakers must quickly sell more electric vehicles or face painful penalties due to tougher climate regulations starting in 2025. Prices are falling now.

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When you consider the total cost over the entire life cycle, electric cars are not only the smarter choice ecologically, but also financially. However, when making a purchasing decision, the focus is on price, and electric vehicles are still on average around 20% more expensive than comparable internal combustion engine models.

The difference is particularly stark when it comes to small cars: Citroën's C3 small car with a petrol engine costs 16,000 francs, while those looking to buy an electric car will have to pay at least 25,000 francs. The slightly smaller Renault 5 also costs at least 25,000 francs. However, a Renault Clio with a fuel tank costs less than 20,000 francs.

The electric Renault 5 is priced from 25,000 francs.Photo credit: Yannick Brossard

But now electric cars are no longer (significantly) more expensive to buy than gasoline cars. And not from China, but from electric cars produced in Europe.

Gasoline cars are getting more expensive and electric cars are getting cheaper

Skoda's new electric family SUV Elroq starts at 36,300 francs. The Skoda Karoq with a combustion engine looks old-fashioned and slightly smaller by comparison, and is priced from 34,040 francs. However, with electric cars, better performance and equipment features are common in base models. “In terms of equipment, both models are equally priced for our customers,” Skoda boss Klaus Zellmer told Handelsblatt newspaper. This means that price parity with internal combustion engines has been achieved for the first time.

There are several reasons why the price advantage of fuel vehicles is gradually shrinking: Internal combustion engines are becoming more and more expensive, not least because of higher legal requirements for auxiliary systems and exhaust gas cleaning technology, which are often already present in electric vehicles or are simply not necessary. Falling demand for gasoline vehicles in many countries has also led manufacturers to raise prices to protect profits. This trend is expected to continue in the coming years.

At the same time, overcapacity in electric vehicles, price pressure from Chinese competitors and falling manufacturing costs (due to lower battery prices, among other reasons) are narrowing the price gap between electric and gasoline vehicles.

European EV prices may fall further in 2025 for another reason.

Electric vehicle prices continue to fall

Skoda CEO Zellmer believes the price of electric cars will rise from 2025 due to rising CO2 emissions₂-EU requirements will continue to decline.

The average emissions of new passenger cars sold next year must be lower than the current level of 116 grams₂ per kilometer dropped to below 93.6 g/km. For every gram exceeding this weight, the manufacturer faces a hefty fine: approximately 90 francs per vehicle. This number increased rapidly as millions of cars were sold.

Problem: It is difficult for mid-range internal combustion engines to achieve values ​​below 140 g CO₂ per kilometer. Carmakers will therefore have to significantly increase sales of electric vehicles from 2025 onwards to reduce CO2 emissions₂-Improving the balance sheet. Volkswagen Group, for example, must increase its electric vehicle share to more than 20% to comply with the new restrictions and avoid fines.

Of course, this doesn't just affect the general public. Most manufacturers will have to offer discounts on electric cars next year to boost sales and comply with tougher carbon dioxide regulations. Otherwise there is a real risk of fines reaching hundreds of millions of francs. Meanwhile, prices for gasoline cars are likely to continue to rise to make up for discounts on electric vehicles.

Is a discount war coming?

Stricter climate regulations are already having an impact: Skoda's sister brand Volkswagen has temporarily dropped the price of Germany's smallest E model, the ID.3, to below 30,000 euros. The ID.3 has been on par with the similarly sized Volkswagen Golf since early October, with a slight price increase.

Anyone with CO in the future₂-Schleuder Buy an electric car and pay a discount.

In our case, the starting price of the electric ID.3 dropped from 35,700 francs to 33,300 francs, with more expensive models also becoming cheaper. Volkswagen said improvements in internal costs made the move possible.

This may not only be a matter of cost savings, but also a strategic consideration: with the threat of fines, it is clearly worthwhile for Volkswagen to promote electric vehicles at the expense of internal combustion engine models – which is in line with the spirit of the European Union. and climate protection. Other manufacturers are likely to follow this model, selling fewer gasoline cars at higher prices and more electric cars at lower prices.

It is understood that from 2030, CO₂The limits will be significantly tightened further, meaning that the share of electric vehicles will then have to increase significantly again.

Volkswagen is cutting prices on the electric ID.3 (picture) and raising prices on internal combustion engine models like the Golf.Image: Volkswagen

China effect

In 2025, we may see discounts on certain electric models more frequently. However, there will not be a discount war like in China in Europe. Chinese manufacturers are not interested either. They are trying to sell electric cars to European customers at the highest possible price to gain discounts in the fiercely competitive domestic market.

A small, cheap electric car? yes they are coming

At the same time, a wave of small electric cars is upon us, thanks to falling battery prices, which could attract new customers to electric cars starting at 20,000 francs. In addition to Volkswagen, companies such as Skoda, Kupra, Renault, Fiat, Hyundai, Nissan and possibly Tesla are also developing cheap electric cars.

Whether these relatively cheap electric vehicles can find enough customers depends largely on how quickly politics, business and society push for the expansion of public charging infrastructure, especially private charging infrastructure. Because this becomes difficult if there are no charging options at home or work. Price reduction or not.