According to a new study by UBS Bank, by 2024 electric cars will cost the same as ordinary cars with internal combustion engines, which will significantly accelerate the global transition from fossil fuel vehicles to electric cars. The reason is the fall in prices for batteries. This, in turn, will lead to an accelerated decline in demand for oil, as about 60% of its global production today is spent on fuel production.

Additional costs for the production of batteries for electric cars, increasing their cost compared to cars with gasoline and diesel, will decline to $1900 per car in 2022 and will completely disappear by 2024, according to a study conducted by the investment bank UBS. It is based on a detailed analysis of the batteries of seven major manufacturers, writes Guardian.

Achieving price parity with internal combustion engines (ICE) is considered by experts to be an important sign of the global abandonment of fossil fuels.

Large car manufacturers are still cautious about stopping the production of profitable cars with internal combustion engines and the transition to electric power plants because of the high cost of batteries, which are almost exclusively produced by Asian companies: LG Chem, Panasonic, CATL. Their cost today is from a quarter to two-fifths of the cost of producing an electric car.

UBS expects battery prices to fall by 2022 below the psychologically important $100 per kWh mark. And those car companies, which will not have time to reorient production, risk to find themselves among outsiders and never catch up with Tesla and Volkswagen, the largest manufacturers of electric cars today.

“By 2025 there will be few reasons to buy a car with internal combustion engine,” UBS analyst Tim Bush said. In his opinion, the decline in battery prices will also destroy the need for hybrid cars that combine batteries with a classic engine.

The rapid reduction in battery costs is expected to result in a faster transition to electric vehicles than previously expected. Sales of electric cars are already growing rapidly in the EU and China, despite a blow to the automotive market caused by the coronavirus pandemic.

Matthias Schmidt, an independent automotive analyst, predicted that in 2020 the EU will sell a million electric and hybrid cars out of a total market of 11 million.

On a global scale, UBS says its market share of electric vehicles will reach 17 percent by 2025. And by 2030, electric cars should already account for 40% of global sales.

All this will have unpleasant consequences for oil companies and refineries. They expect that the demand for oil will remain high for at least 20 years and only then will start to slowly decline. But the rapid drop in prices for batteries for electric cars may bring dramatic acceleration to this scenario.