‘Cheaper produced EVs will be much costlier to repair than ICEs’

Automakers are racing to transform their supply chain and hereditary production plants from the ICE age into lean factories for EV production. They will need to hold their breath for some time before expecting a profitable production arm. Elevated repair costs are looming as a new challenge.

Slumping sales of battery-powered cars, caused by waning private customer demand, are troubling the automakers, who keep piling up losses from their EV subsidiaries. But getting these departments in the black is about streamlining production and turning a profit in the assembly halls.

Cost parity in 2027

At least there’s light on the horizon. American market research firm Gartner has calculated that, based on a significant shift in production cost dynamics, battery-powered vehicles are expected to be less expensive to produce than their internal combustion engine by 2027.

This price shift is attributed to innovative manufacturing methods that are set to lower production expenses more rapidly than the costs of batteries, which currently constitute around 40% of an EV’s price tag.

According to Gartner, this innovation spawns from centralized vehicle architectures, like Volkswagen’s MEB structure, and the introduction of gigacastings. The latter are Giga Presses, or large casting machines introduced and popularized by Tesla. These enable the manufacture of large, single pieces of an EV body, thereby streamlining production processes and reducing the workload for assembly robots.

Tesla announced last year it has taken this process one step further and will soon be able to die cast almost the complete underbody in one piece. The Model 2 is reportedly the first to benefit from what Musk calls “Hot Wheels” production, after the toy cars made from a single pressing.

The trade-off

That sounds promising, but there’s an edge – or a trade-off. Gartner’s vice president of Research, Pedro Pacheco, emphasizes the dual-edged nature of this: “While these innovations promise to bring BEVs and ICE vehicles to cost parity sooner than anticipated, they also pose new challenges for vehicle maintenance, potentially elevating the costs of serious accident repairs.”

The firm predicts a 30% increase in the cost of repairing an EV’s body and battery post-collision by 2027, raising concerns over the economic feasibility of repairs versus vehicle value retention. In short, accident EVs will be written off much faster than their ICE counterparts, posing questions about the material sustainability of electrified mobility. This could also considerably affect insurance and rental prices for electric vehicles.

The demise of EV start-ups

Last year, the side effects of this production technique became clear when rental companies Hertz and Sixt announced they were dropping their Tesla cars and orders due to higher-than-expected maintenance costs and aggravated residual values due to the EV makers’ price war. These announcements seem to shadow a similar scenario for other carmakers going down the same line.

Lastly, the Gartner report also sheds light on the competitive landscape of the EV industry, forecasting a consolidation wave in which approximately 15% of EV start-ups established in the past decade will either be acquired or face bankruptcy by 2027. The current struggling financial woes of Fisker, Rivian, Lucid, Hiphi, and others seem to be pulling that deadline.