Electric vehicles (EVs) are either the future of transport or the next big thing that is expected to collapse within a few years of launch, depending on the age of the person you ask.
Either way, they’re no longer niche: in 2024, roughly one in five new cars sold worldwide was electric, with about 17 million EVs sold globally. And for such a change to happen, EVs HAVE to be economically fruitful. And boy, are they.
Let’s start with their biggest cost: batteries. Since these battery packs are essentially a giant box of expensive raw materials (lithium, nickel, cobalt and friends) plus cooling, safety, and software systems, it can add up to 40–50% of the total cost of manufacturing an EV.
In 2008 a lithium-ion battery pack cost over $1,400 per kWh. By 2023, their prices had fallen by nearly 90%, to around $139 per kWh.
Further projections estimate pack prices to keep falling towards $80/kWh by 2026, a level where owning an EV could match gasoline cars on cost even without subsidies.
Here, falling battery costs shift the supply curve to the right, as each EV becomes cheaper to produce, and manufacturers can cut prices or improve range without blowing up their margins.
Governments, though, are naturally not waiting for the market to sort itself out.
In the U.S., buyers can get up to $7,500 in federal tax credits for qualifying EVs, plus extra help for installing home chargers.
From an economic perspective, these subsidies can be considered an attempt to correct a negative externality, as every gallon of gasoline burned incurs climate and health costs that no one necessarily pays for.
So by nudging consumers toward electric cars, policymakers may be hoping to align private incentives with social benefits.
But this policy also creates winners and losers.
Smaller countries like Norway, which piled on subsidies and tax breaks, now see EVs making up nearly all new car sales, while they’re also scrambling to redesign road taxes as fuel duties disappear.
On a production level, automakers that entered the industry earlier (ex.Tesla and BYD) enjoy economies of scale, while laggards struggle with massive fixed costs. Take Tesla—they pour billions into Gigafactories that stamp out batteries, motors, and cars on shared platforms, meaning each extra vehicle helps spread those fixed costs and drags its average cost per car down in a way newer entrants can’t easily replicate.
But on the flip side, oil producers, repair shops (EVs need less maintenance), and some workers in traditional auto supply chains bear the adjustment costs.
Ultimately, EVs are less a shiny tech story and more a slow, structural shift. Sure, it’s a change that goes against the ethos of a gasoline-run world, but perhaps it’s for the best.
As batteries get cheaper and policies keep rewarding low-emission choices, the “electric” part of an electric vehicle may begin to matter less than the “vehicle” part, and who knows, maybe they can even be the default way we move.


Works Cited
International Energy Agency. “Global EV Outlook 2025.”
International Council on Clean Transportation. “Global EV Market Monitor for Light-Duty Vehicles.”
U.S. Department of Energy, Vehicle Technologies Office. “Electric Vehicle Battery Pack Costs for a Light-Duty Vehicle in 2023 Are 90% Lower than in 2008, According to DOE Estimates.”
Goldman Sachs Research. “Electric Vehicle Battery Prices Are Expected to Fall Almost 50 Percent by 2025.”
Internal Revenue Service. “Credits for New Clean Vehicles Purchased in 2023 or After.”