High running cost risks shift to EVs

Article tags AutomotiveEnergyGlobalMiddle East and AfricaCountry Analysis

• Global electric vehicle (EV) sales have risen in the past few years on the back of a variety of incentives from governments, including purchase subsidies to reduce sticker prices for buyers. However, an increase in electricity prices, partly triggered by the Russia-Ukraine war, has substantially raised the cost of charging an EV, pushing up the overall cost of owning such a vehicle. Additionally, over the past two years, most countries have also experienced a hike in fuel costs owing to high international oil prices.
• Some countries, especially those in Europe, witnessed higher volatility in energy costs. In April 2023 end-user residential electricity prices in capital cities averaged 26.5 euro cents per kWh for EU-27 countries, about 1.6% lower year on year, according to the Household Energy Price Index. The same metric was as high as 46.65 euro cents in London, as compared with 61.3 euro cents in April 2022. 
• Electricity costs have declined in 2023 so far as compared with 2022 year-end prices. However, in the UK, the average cost of using rapid and ultra-rapid public chargers increased by about 55% and 46%, respectively, from May 2022 to April 2023, according to RAC, an automotive services company. The UK also had the second highest price ranking for electricity prices in 2022, after the Netherlands, according to the International Energy Agency (IEA). In March 2023 the EU proposed electricity market reforms as part of the Green Deal Industrial Plan, aiming to decrease volatility in electricity prices.
• Meanwhile, in 2022 global motor gasoline (fuel) prices rose by about 20% year on year, averaging about US$1.22/litre, according to the IEA. Brazil noted the biggest jump in prices, by about 90% to US$2.05/litre. The UK saw about a 9% increase over the previous year. We expect fuel prices to remain high as global oil prices will remain elevated in 2023 and 2024, averaging US$80.7/barrel and US$76.6/barrel, respectively. In the longer term, we expect oil prices to drop below US$70/barrel by end-2027.
• EV battery costs are another major expense for vehicle buyers even as the average battery price was estimated at US$150/kWh in 2022, about 14% lower than 2021, according to the IEA. Prices have been declining despite the cost of lithium carbonate and other raw materials skyrocketing in recent years (see chart). However, battery prices will remain at risk of a looming battery shortage caused by a crunch in lithium supplies.
• Running costs for vehicles are a major deciding factor for buyers and elevated electricity and fuel prices could delay the shift to clean mobility. EIU forecasts global EV sales to expand by about 23% to 12.4m units in 2023. In a nutshell, the running cost of vehicles has increased for both EVs and internal combustion engine vehicles.

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Fri, 26th May 2023 Article tags AutomotiveEnergyGlobalMiddle East and AfricaCountry Analysis