Why Are EVs More Expensive Than ICE Vehicles?

Nowadays, the popularity of electric vehicles (EVs) is rising rapidly. However, when it comes to cost, they appear to be more expensive than traditional petrol and diesel engine (ICE) vehicles. Why is the price of EVs higher? Is it a good investment? Let’s understand this in detail.

The most expensive component of an EV is its battery. Lithium-ion batteries are made using rare metals such as lithium, cobalt, and nickel. These materials are expensive, and their mining and processing add to the cost, making EVs more expensive. However, the good news is that battery technology is improving, and in the future, EV prices may decrease.

ICE vehicles have been in the market for decades and are mass-produced, which keeps costs low. However, EVs are still a relatively new technology and are produced in limited quantities. Low production volume increases per-unit costs, leading to higher prices.

EVs use new and advanced technologies. Companies invest heavily in battery technology, motor design, and charging infrastructure. Additionally, research and development (R&D) costs are also passed on to consumers. This is why EV prices remain higher than ICE vehicles.

Building and operating charging stations for EVs is costly. Although governments and private companies are investing in this area, until the charging infrastructure is fully developed, a significant price drop in EVs remains unlikely.

In India, schemes like FAME II provide subsidies for EVs, yet their prices remain high. On the other hand, ICE vehicles benefit from an established supply chain and government-imposed tax structures that keep their costs lower.

Although the initial cost of EVs is high, their maintenance is minimal. EVs have fewer moving parts and require less frequent servicing. With rising petrol and diesel prices, using EVs can lead to substantial long-term savings.

Dr. Yogesh Bhatia, MD & CEO of LML, states, "The higher cost of EVs compared to ICE vehicles primarily stems from the battery, which makes up a significant portion of the overall price. While advancements in battery technology and economies of scale are driving costs down, factors like raw material availability, charging infrastructure development, and localized manufacturing still play a crucial role in achieving price parity. At LML, we see a strong push towards innovation, efficiency, and sustainability, which will help bridge this gap in the near future. As the supply chain stabilizes and government policies continue to support EV adoption, we anticipate a more competitive pricing landscape. However, affordability is not just about upfront cost—it’s also about long-term savings, lower running costs, and the environmental benefits that come with electrification. The industry is moving in the right direction, and we believe that as technology matures, EVs will soon become a mainstream and cost-effective choice for consumers."

Conclusion

EV prices may be high right now, but with technological advancements and government policies, they may soon become comparable to or even cheaper than ICE vehicles. If you consider long-term savings, lower maintenance, and environmental benefits, purchasing an EV can be a smart decision.