Electric cars will get cheaper in 2024 with a ‘price war’ set to develop

New electric vehicles will become more affordable this year with a price war set to unfold, experts predict.

The arrival of less expensive Chinese brands and the introduction of the Zero Emission Vehicle (ZEV) Mandate is going to force the hands of other makers to slash their prices in order to remain competitive and meet new binding targets for EV sales set out by the Government.

‘Drivers considering taking the first step on their electrified driving journey have never been in a better position to benefit from falling EV prices than in 2024,’ says Auto Trader, the country’s largest automotive marketplace.

An electric car price war is on the brink in 2024: Experts detail the two big changes to the market that will force manufacturers to slash their battery vehicle pricing this year

The emergence of Chinese manufacturers is going to cause a big shift in the nation’s new car sector.

Brands from China are expected to capture a sixth of the UK’s EV market by 2030 as its manufacturers look overseas after conquering their domestic market, Auto Trader’s Road to 2035 report states.

China has already cemented itself as the world’s biggest exporter of cars, overtaking Japan last year. 

And exclusive analysis by MailOnline and This is Money’s motoring department found that some are already having a huge impact on the UK car market.

MG, with its focus on affordable EVs like the latest MG4, accounted for over 4 per cent of vehicle registrations in the UK last year. 

In just a decade, Shanghai-operated MG Motor has increased its market share of new motors sold per year by a massive 19,094 per cent – more than any other brand over the last 10 years – and now sells more new vehicles than Skoda, Peugeot, Land Rover, Volvo, Renault and even Tesla.

MG is arguably the biggest automotive success story of the last decade. The relaunched brand under Chinese ownership represented 0.02% of all new cars sold in 2013. With the brand focused on budget-friendly EVs like the MG4 (pictured), it now outsells Skoda, Peugeot and Land Rover

Other Chinese brands, like GRW (Great Wall Motor) and BYD (Build Your Dreams), are just breaking into the UK market and are still establishing themselves.

It was recently confirmed that BYD overtook Tesla as the world’s biggest manufacturer of electric vehicles in the final three months of 2023, selling a record 526,000 vehicles globally. 

Searches for BYD cars trebled on Auto Trader in the days after the news, accounting for more than 6 per cent of all new EV advert views.

And Chinese brands have the capacity to slash their prices even more.

BYD’s Dolphin EV, for instance, costs from £13,000 in China but starts at £25,000 in the UK. 

As for GRW’s ORA 03 (formerly the Funky Cat) supermini, the gulf is £19,000 (£12,000 starting price in China and £31,000 in the UK).

However, this is also courtesy of huge Chinese-Government subsidies and big import taxes.

The BYD Dolphin (pictured) arrived in the UK last year. But the new price in Britain is £12k higher than it is in China

Ora’s Funky Cat (recently renamed to 002) arrived in the UK in 2022 with a price tag from £31k. However, big Government subsidies in China means it is sold there for just £12k

Established European car makers, like VW and Renault, will have to recalibrate their EV pricing if they want to stay competitive against Chinese newcomers, Auto Trader says

‘This gap gives Chinese entrants the pricing power to take on established Western brands in the UK, where unlike other European markets there’s no dominant player, and competition for market share is more fierce,’  Auto Trader’s team of expert analysts say. 

‘With upfront cost the primary EV consideration barrier for 56 per cent of buyers, pricing is set to become a key battleground in the EV transition. 

‘Here, BYD has a particular price advantage as it is also the world’s leading producer of rechargeable batteries, the most expensive component of an electric vehicle.’

Already, established brands are having to strike deals to sell their new EVs to Britons. 

The average discounts on an EV in UK showrooms currently is 10.6 per cent – that compares to a typical average discount on a petrol, diesel or hybrid car of just 7,7 per cent.

Four in five new EVs also comes with a reduced or zero finance offer as manufacturers try to tempt buyers and maintain their market share, Auto Trader says.

The ZEV mandate will force car makers to sell an increasing volume of EVs between now and 2035 – this will likely have an impact on pricing and discounts offered on new electric cars

ZEV mandate will forces EV prices lower 

It’s not just the arrival of Chinese brands that will force down the price of new EVs – so will new binding thresholds for electric car sales that have come into force this year. 

The ZEV mandate in 2024 – under which manufacturers must ensure a minimum of 22 per cent of their sales are electric, or face fines of £15,000 for every sale that misses the target – will build the pressure on prices as sellers look to tempt retail buyers.

Under the ZEV regime, 80 per cent of cars sold in the UK must be electric by 2030 and data shows that the current average share of electric sales across brands is just 16 per cent.

For some makers, their EV share of all car sales in Britain is as low as 3 per cent.

While brands falling well below the ZEV targets will be able to buy ‘credits’ from other manufacturers who exceed the threshold (say Tesla and Polestar, which sell only EVs), this will also be an expensive outlay. 

Auto Trader also points to geopolitical factors that are likely to force oil prices higher again this year, which in turn means petrol and diesel could become more expensive and be another reason for drivers to consider making the switch to an EV before the 2035 ban on sales of new combustion engine cars. 

Ian Plummer, commercial director at Auto Trader, said: ‘The introduction of the ZEV mandate means that manufacturers are still under pressure to sell more electric cars and to do that, they’ll need to compete on price. 

‘The rise of China in electric cars will only add to that pricing pressure as they have the firepower to grab UK market share.

‘To really ignite mass adoption of electric cars, the government should consider a fairer approach by equalizing VAT on public and private charging as well as reducing VAT on second hand electric cars.’