Car makers losing $6000 on every electric car they sell – report

US report finds that added costs of making electric vehicles are making it hard for manufacturers to turn a profit.

Car manufacturers are losing $6000 on every electric car they sell, according to a new report from the United States.

The study, undertaken by the Boston Consulting Group study, found that motorists toying with the idea of going electric for their next vehicle purchase want three main things: short charging times, a 560km-plus driving range, and to pay roughly $US50,000 ($AU76,000). 

On that basis, the Group estimates most automakers lose around $US6000 ($AU9000) on each electric vehicle they sell for $US50,000, after accounting for customer tax credits.

Using US pricing, only one electric model available today is ticking most consumers' boxes – the Hyundai Ioniq 6, which starts from $US42,450 before on-road costs. The Tesla Model 3 runs a close second.

The Boston Consulting Group warns if manufacturers can’t turn a profit from this generation of electric vehicles (EVs) then there will be trouble ahead.

"If [original equipment manufacturers] can't make money in this next generation [of EVs] … something's going to have to change," senior partner Andrew Loh told Automotive News.

There are, of course, some exceptions to this rule. Tesla has been profitable for many years, and even Chinese newcomer BYD is making money now.

According to Inside EVs, historically the average level of profitability from mass-market internal combustion-engined vehicles (ICE) is around 10 per cent, but add in other costs such as an EV’s battery, the e-powertrain and additional electronics and upgrading factories and quickly that number starts to fall into the red.

In other words, high capital costs in the early stages of EV development, being built at operations that aren't yet fully at scale, are to blame, and to survive partnerships across automakers and suppliers to split costs are critical for EV profitability.

“There's too much upfront investment, and there's too much individual model risk for both vehicle manufacturers and suppliers to incur on their own," Brian Collie, global leader for Boston Consulting Group's automotive and mobility practice, told Automotive News.

"Partnerships and joint ventures are the way to drive greater scale."

Automakers can also close half of the cost gap with effective technology choices, such as higher-density batteries, more efficient electric motors and better battery management software. They should also identify efficiencies in EV and internal combustion vehicle production, Boston Consulting Group said.

Even so, the study revealed carmakers are still likely to lose about $US3000 on every $50,000 EV they sell.

In the US last year, many car firms predicted a 70 per cent sales growth based on sales virtually doubling from 2020 to 2022, however growth in fact only reached around 50 per cent in 2023.

In Australia meanwhile, in 2023 of the roughly 1.2 million vehicles sold, 7.2 per cent were battery-electric – rising to 16.2 per cent when hybrid and plug-in hybrid vehicles are included.

The average price of an electric car locally in 2023 was thought to be around $AU86,000.