Today, electric cars often have a lower total cost of ownership than ICE cars over the vehicle lifetime, due to reduced fuel and maintenance expenses. However, reducing the purchase price1 gap will be key to broader uptake. In Europe, for example, respondents to a 2023 survey by the European Commission identified the price of battery electric cars as the main barrier to adoption. While battery electric car prices generally fell in 2024, the price gap with ICE cars remains in most regions.

Electric car affordability has made significant strides over the past decade, primarily driven by falling battery prices, intensifying market competition and carmakers reaching economies of scale. In 2024, despite the global average battery size growing slightly, the global average battery pack price fell more than 25% compared with 2023 levels. This resulted in a global drop in electric car manufacturing costs that was reflected in the price of electric cars.

However, the trend towards falling prices has been uneven across markets, due to differences in carmakers’ pricing strategies, and in market maturity and the level of competition. For example, in China, the sales-weighted average (hereafter, “average”) price of a battery electric SUV fell almost 10% year-on-year in 2024, partly due to the 30% decline in the battery pack price. Similarly, in the United States, a 15% decline in battery prices contributed to a 3% drop in the average purchase price of electric SUVs in 2024. In contrast, in Germany, the price of electric SUVs slightly increased in 2024, despite their battery pack prices declining 20%. This suggests that the battery pack price is not the only factor influencing EV prices: other component manufacturing costs, trim levels and carmakers’ pricing strategies also play a significant role. 

Availability of a wide range of affordable EV models will be key to unlocking mass-market adoption. In 2024, there were fewer BEV models available than ICEV models in the United States and Europe, and the range was skewed towards higher-end models with higher prices. Conversely, in China, the price distribution of available BEV models closely resembles that of ICEVs, with about 40% of available electric models priced below USD 25 000 (against 45% for ICEV models), and more than half below USD 30 000. In 2024, this price distribution was reflected in sales, with the median price paid for a battery electric car standing at around USD 24 000, about USD 700 less than for an ICE car. This trend towards a larger share of more affordable models is expected to continue in the short term, as 60% of announced models with a known price are expected to launch below the USD 30 000 mark.

Contrasting trends were also seen in the affordability of plug-in hybrids. In China, prices for medium PHEVs dropped 15% from 2023 to 2024, and SUV-type PHEV prices fell 7% over the same period. However, in Germany, the average purchase price of medium and SUV-type PHEVs grew more than 5% year-on-year. This was partly driven by their average battery size growing, causing their battery pack prices to increase by about 15%. In 2024, in Europe, only 1 of the around 130 PHEV models was priced under USD 40 000, compared with more than 40 BEV and 155 ICEV models marketed below this price tag. Similarly, in the United States, the 4 cheapest PHEV models available were priced between USD 30 000 and USD 40 000, while about 60 ICEV models were marketed below this price range. The US and German markets contrasted markedly with that of China, where nearly 40 PHEV models were available with a price tag below USD 25 000, competing with more than 250 ICEV and 140 BEV models within the same price range. 

Price-competitive electric cars in China are driving rapid electrification across all segments

In China, the rapid electrification of small cars has been underpinned by their unrivalled affordability. In 2024, nearly all small battery electric car models in China were priced lower than the average small ICE car, and the average purchase price was about half that of the average small ICE car. This led to the almost complete electrification – nearly 95% – of small car sales in China in 2024, up from a share of 75% 3 years earlier. Nevertheless, the small car segment makes up only a small share of the Chinese car market, accounting for less than 10% of sales in 2024.

In 2024, BEVs also reached price parity with ICEVs in the SUV segment – the most popular car segment in China, accounting for half of all car sales. More than half of battery electric SUV sales were priced lower than an average ICE SUV. Plug-in hybrid SUVs were also sold at cheaper price levels than ICEV models for the third consecutive year, supporting their steady uptake in this vehicle segment. While progress on affordability has supported the growing sales shares of BEVs and PHEVs, adoption of EREVs seemed to be more a result of consumer preferences rather than purchase price competitiveness. In 2024, the average price premium of EREVs over ICEV models stood at 60%, marking slim progress from 70% three years ago. Despite their higher purchase price, the market share of EREVs within the SUV segment grew to reach 10% in 2024, suggesting that this hybrid powertrain technology is appealing to wealthier consumers who are less price sensitive and seek boosted range in high-end vehicle models.

In the medium car segment, which represents about one-third of total car sales in China, BEVs were 20% more expensive than conventional equivalents in 2024, down from 40% in 2021. PHEV prices also dropped. For the first time, the sales-weighted average price of medium PHEVs in 2024 was 10% lower than conventional models. As a result, PHEV sales in the segment more than doubled, and more than one-third of medium car sales in China in 2024 were electric.

Electric car affordability improved in all car segments in China thanks to falling battery pack prices, a high level of supply chain vertical integration and fierce competition within the Chinese EV market. Overall, in 2024, close to two-thirds of the battery electric cars sold in China were cheaper than their ICE equivalents, up from half in 2021 and just 10% in 2018.

Affordability stagnates in Europe, but carmakers expand line-ups with low-cost EVs amid CO2 standards shift

In Europe, carmakers’ pricing strategies and focus on high-profit-margin premium models have led to stagnating battery electric car prices. In Germany, for example, the average price premium for small battery electric cars remained almost unchanged between 2021 and 2023, plateauing at over 50% more than equivalent small ICE models. The price premium for small battery electric cars fell slightly in 2024 to around 45%. In contrast, the price premium for battery electric SUVs increased to reach 20% in 2024, effectively reversing the small decrease seen over the 2021-2023 period. The price premium of PHEVs compared to conventional equivalents has grown consistently since 2022, reaching more than 30% for medium-size cars and 50% for SUV-type cars in 2024. This trend hindered electric car adoption in Germany in 2024, especially when combined with the phase-out of purchase subsidies in late 2023. In 2021, almost one-third of battery electric SUVs sold in the country were cheaper than their average ICE equivalent, but by 2024, this share had fallen to one-fifth.

In other European countries, the affordability of electric cars saw little change. In the United Kingdom, for instance, the average price premium of battery electric SUVs made only slim progress, dropping to 30% in 2024 from 40% in 2021. The pricing trend of plug-in hybrid SUVs was similar, with their price premium having been stuck at around 45% for the last 3 years. 

This lack of progress on affordability reflects the limited availability of cheap electric car models across Europe. In 2024, while nearly one-quarter of available ICE car models were priced below EUR 30 000, only around 5% of battery electric models were. Models priced below EUR 25 000 are expected to be key enablers of wider market adoption, but they accounted for only a slim share (3%) of available battery electric models in Europe last year. However, the new phase of the EU CO₂ standards entering into force in 2025 is expected to prompt carmakers to release more affordable electric models to boost their EV sales and comply with their respective fleet-wide CO₂ targets. So far, both European and foreign carmakers have announced launches of battery electric models for the European market priced at under EUR 25 000, including Renault, Volkswagen, Hyundai, and BYD. Overall, nearly ten battery electric models priced at under EUR 25 000 are expected to be released by the end of 2026.

Limited availability of affordable models hinders US electric car sales growth

In 2024 in the United States, about one in five electric SUVs (including pick-up trucks) was sold at a lower price than the average conventional SUV. This is particularly significant given that SUVs account for three-quarters of total car sales in the United States. Progress on battery electric car affordability has fluctuated in recent years. In 2023, the average purchase price premium of battery electric SUVs noticeably decreased to 25% from 50% in 2022, largely as a result of Tesla repeatedly slashing prices in an attempt to maintain its market lead in the United States. However, despite further price reductions to the Tesla Model Y SUV in 2024, Tesla’s market share fell around 10% year-on-year. This decline outweighed the impact of the late price cuts, leaving the average price premium of battery electric SUVs in the United States unchanged from the previous year.

The contrast with conventional models is stark: in 2024, only 2 battery electric models (3% of battery electric car models) were priced below USD 30 000, compared to more than 50 ICE models (20% of available ICE models). In the short term, Honda, Fisker and Volkswagen have all recently announced they will launch “affordable” compact electric SUVs, bringing to market a handful of models under the USD 30 000 mark. However, most of the BEV model releases expected by 2026 that have been announced with launch prices are in the premium car category, with over 70% anticipated to have a purchase price of more than USD 50 000.

The average purchase price of plug-in hybrid SUVs has increased over the past 3 years. In 2024, the price was almost 10% higher than that of battery electric counterparts, and 35% higher than conventional SUV models. Fewer than 10% of the more than 50 available PHEV models were priced below USD 40 000 while 70% were above USD 50 000. This high price premium, combined with the limited availability of affordable models, remains a significant barrier to wider adoption. As a result, PHEV sales stood at 2% of total SUV sales in 2024, as in 2023.

In emerging markets, affordable Chinese models are driving EV adoption

In 2024, in most emerging EV markets, the price of the cheapest battery electric car was lower than the average price of an ICE car. In some markets – such as Indonesia, Thailand and Mexico – the cheapest battery electric car models even retailed at similar prices to the cheapest ICE models. Choosing an electric car in these markets could carry little to no price premium.

In all of the five emerging markets assessed – Brazil, India, Indonesia, Mexico and Thailand – electric models made by Chinese OEMs were, on average, cheaper than the average electric car, helping to drive uptake. The cheapest Chinese battery electric car was, in most cases, also the cheapest option on the market, so much that in Thailand in 2024, the average price of a Chinese EV was lower than the average price of a conventional car. In 2023 and 2024, more than four out of every five battery electric cars sold in Thailand were imported from China, bringing the average price of BEVs nearly in line with that of conventional cars. On average, medium and SUV model BEVs were more than 20% cheaper than their conventional equivalents, and the overall price premium of BEVs, across all car segments, stood below 5%. 

In Brazil, where Chinese electric car imports increased to reach 85% of the country’s EV sales in 2024, up from about 60% in 2023, the price gap between battery electric and ICE cars shrank from more than 100% to 25% over the same period. In 2024, not only was the cheapest battery electric car model produced in China by a Chinese OEM, but Chinese BEVs also retailed at less than half the price of those produced by non-Chinese OEMs on average (most of which belong to larger car segments). The average price of PHEVs also fell in 2024. In particular, plug-in hybrid SUVs – which accounted for nearly half of Brazil’s electric car sales in 2024 – saw their price premium over ICE equivalents drop below 70%, compared to a premium of more than 80% for battery electric SUVs. This decreasing price gap boosted the adoption of PHEVs within the SUV segment, whereas BEVs gained more traction in the small and medium car segments, where their average price premium halved year-on-year to reach less than 40% in 2024.

In Indonesia, after import duties were waived under local investment requirements, Chinese EV imports surged to reach two-thirds of the country’s EV sales in 2024, up from about 10% in 2023. Like in other emerging markets, Chinese battery electric car models became the most affordable options available, with an average price over 60% lower than BEVs from non-Chinese OEMs. As a result, the average price premium of BEVs dropped to around 50% in 2024, down from being, on average, twice as expensive as conventional cars in 2023.

In Mexico, the average price premium of BEVs fell to 50% in 2024 from more than 100% in 2023, as the share of Chinese imports in EV sales grew to nearly two-thirds. However, Chinese brands were not the only ones driving affordability. While the cheapest BEV model available (Renault’s Kwid E-Tech Electric) was produced in China, it was sold under a European brand.

In India, high import duties on EVs and the availability of locally made, affordable electric models meant the share of Chinese imports in the country’s EV sales remained below 15% in 2024. While the cheapest battery electric car model was produced locally by a Chinese OEM (SAIC’s city car, the MG Comet EV, priced under USD 8 000), the average price of imported Chinese BEVs was twice that of those made by domestic manufacturers. In 2024, all BEV models manufactured by Indian carmakers started below USD 20 000, while none of the imported Chinese BEV models were priced under that threshold. Overall, the average price gap between battery electric and ICE cars fell below 15% for small cars and 25% for SUVs in 2024.