The CRO of an automobile manufacturer in North America prepares a keynote address on risks in the auto sector over the next decade. The CRO highlights the primary technology risks facing its line of internal combustion engine (ICE) vehicles.
At approximately what point will many manufacturers of ICE vehicles experience a significant technology risk?
The cost of battery packs falling below USD 100.00 per kilowatt hour is a significant technology risk point for internal combustion engine (ICE) vehicle manufacturers. This is because battery packs are one of the most expensive components of electric vehicles (EVs). When the cost of battery packs drops below this threshold, EVs become more cost-competitive with ICE vehicles, even without subsidies or further policy incentives. This price parity means that consumers will have a strong economic incentive to switch to EVs, posing a significant challenge to manufacturers of ICE vehicles.
3.4.2 According to Bloom-bergNEF, electric vehicles will hit price parity with inter-nal combustion engine (ICE) vehicles once battery pack prices (the single most expensive component of EVs) reach USD 100/kWh. Based on current trends, the threshold of USD 100 is expected to be reached around 2023. After this point, EVs will be as affordable as, and after, even cheaper than, combustion engine vehicles—even without subsidies or further policy incentives, meaning there will be a strong economic incentive to switch and that existing ICE fleets may end up becoming stranded assets.