The cost of owning an electric car will fall to the same level as petrol-powered vehicles next year, according to bold new analysis from UBS which will send shockwaves through the automobile industry.

Experts from the investment bank’s “evidence lab” made the prediction after tearing apart one of the current generation of electric cars to examine the economics of electric vehicles (EVs).

They found that costs of producing EVs were far lower than previously thought but there is still great potential to make further savings, driving down the price of electric cars.

As a result, UBS forecasts that the

“total cost of consumer ownership can reach parity with combustion engines from 2018”,

with this likely to happen in Europe first.

“This will create an inflexion point for demand,”

the analysts said.

“We raise our 2025 forecast for EV sales by ~50pc to 14.2m – 14pc of global car sales.”

If the prediction comes to pass, traditional car industry giants could face ruin. Germany’s Volkswagen Group – the world’s biggest car company – is racing to catch up with rivals’ investment levels in electric drivetrains, the components which deliver the power into the wheels, having largely ignored the technology in the past.

UBS’s research was to help understand what it called the

“most disruptive car category since the Model T Ford”.

The findings are based on its deconstruction of a Chevy Bolt, which it considered to be “the world’s first mass-market EV, with a range of more than 200 miles”.

 “We estimate that GM (which produces the Bolt) loses $7,400 in earnings before interest, and tax on every Bolt sold today, mainly due to a lack of scale.”

Read more: The Telegraph

It has long been speculated that electric vehicle adoption may have a sudden tipping point of adoption. IDTechEx pointed out that incentives help as does reaching lower cost of ownership but lower up-front price is the killer blow.

We noted how that has happened with small vehicles such as gasoline-assisted bicycles and golf cars becoming more expensive than pure electric alternatives, this resulting in runaway adoption of electric. Ten years ago, IDTechEx correctly predicted that this will progress to ever larger vehicles with on-road small cars in line for being cheaper as pure electric from 2020 onwards.

On cue, several car makers have now said they will be offering pure electric versions at no price penalty in that timeframe. That is more dramatic than it sounds, because maintenance of the much simpler pure electric powertrain and the cost of the electric “fuel” are tiny compared to conventional and vehicle life is often to be longer too.

Domino effects

There will be a domino effect. Take diesel. Many cities have set dates when they will ban diesel vehicles and some countries are contemplating such legislation. Globally sales of diesel vehicles are dropping due to the Volkswagen scandal, purchasers fearing that resale prices may collapse. In European countries sales of diesel are essential to gasoline stations: for example, in the UK, they represent 65% of fuel sales. There, the number of such “forecourts” is one sixth of what it was and the few remaining ones will be very tempted to grab the hefty increased property value and let someone turn them into apartments or, since they are shopping locations already, as supermarkets.

Ironically, shutting down gasoline stations is encouraged by the fact that you cannot make significant money out of EV chargers on your forecourt. Legislation is going through in the UK that gives the government the right to force the larger forecourt owners to provide EV charging.

Other unintended consequences

The unintended consequence will be extra journey time and hassle for drivers seeking petrol, not just diesel. Suddenly it is the internal combustion engines that become a pain to refuel whereas EVs are charged at home and at destination, a convenience not possible with the conventional vehicle.

This will make petrol vehicles undesirable even before cities and countries ban them and they become overpriced as they become more complex to meet 2025 and 2030 carbon dioxide laws intended to reduce global warming and a raft of acid gas restrictions, diesel being hit by particulate restrictions too.

Multiple hits

We face multiple hits on conventional vehicles all the time now, another example being linkage between diesel and breast cancer, depression and more, not just lung and heart disease.

As causality is proven and the true scale of injuries is revealed, people will be more and more cautious of putting money that way and that includes investors, so modernisation of facilities, reduced emissions and competitive pricing of conventional vehicles becomes more and more difficult.

Fuel cell tipping point

With runaway adoption of battery electric vehicles, even the grants for these non-green fuel cell vehicles are under threat, creating a self-fulfilling prophesy and boosting pure electric.

IDTechEx correctly forecasted the realisation that fuel cell vehicles will never be mainstream but, like all forecasters, we are struggling to predict accurately when the tipping point of pure electric cars will come.

Read more: IDTechEX