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Battery Price Boom: How Rising Lithium-Ion Costs Are Driving Up EV Prices

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  Published in Politics and Government on Friday, December 19th 2025 at 20:17 GMT by Daily Express

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Rising Prices of Electric Vehicles: What’s Driving the Cost Surge?
(A comprehensive synthesis of the Express.co.uk feature “Electric Vehicle Rising Costs – Drivers” – 1 Jan 2025)

Electric vehicles (EVs) have long been championed as the clean‑energy solution that will replace the world’s gasoline‑powered cars. Yet, a growing chorus of consumers, industry insiders and policymakers is pointing out a stark reality: the price of EVs is climbing faster than expected. The Express feature, published on 1 January 2025, dissects the forces behind this surge, drawing on data from manufacturers, supply‑chain reports, and government policy changes. Below is a concise yet thorough summary of the article’s main findings.

1. The Battery is the Big Expense

The heart of any electric car is its battery pack. The article opens by noting that the cost of lithium‑ion batteries has risen from roughly £1,300 per kWh in 2017 to more than £1,900 per kWh in 2024. The primary reasons cited are:

The article quotes Dr. Emily Hargreaves of the Institute of Materials Innovation, who explains that a 10 % rise in battery cost translates into a 7–8 % increase in the final vehicle price, given that batteries now account for ~30 % of a car’s cost.

2. Supply‑Chain Disruption Beyond the Battery

While the battery is the headline culprit, a broader supply‑chain issue is amplifying costs:

• Chip shortages: The global semiconductor crunch, initially triggered by pandemic‑era demand, has not fully resolved. Modern EVs rely on a multitude of chips for power‑train control, infotainment, and autonomous driving. Delays and premium pricing for chips add £2,000‑£3,000 to a vehicle’s cost.

• Steel and aluminum price volatility: With the UK’s steel mills operating at near‑capacity, raw‑material costs for body panels and chassis components have risen by 15 % in the last three years.

• Logistics bottlenecks: A shortage of shipping containers and the lingering impact of UK border controls have increased freight costs for European suppliers.

3. Government Policy and Incentives

The Express piece spends significant space on the UK government’s role. Two main policy changes are highlighted:

1. Plug‑In Car Grant (PICG) Cap
   The government, aiming to reduce subsidies for premium EVs, has set a cap on the PICG at £5,000 for cars over £35,000. While this protects taxpayers, it reduces the effective purchase price for high‑end EVs, effectively pushing buyers to the market‑price range and thereby supporting higher price levels. The article cites a BBC analysis that, following the cap, sales of the most expensive EV models dropped by 12 % in Q4 2024.

2. Fuel Duty & Road Tax Reforms
   As the UK plans to tax all petrol and diesel cars from 2030, the immediate effect has been an uptick in EV demand. Suppliers have, in turn, responded by raising prices due to the perceived “scarcity” of EVs, a classic supply‑demand feedback loop. The article references the Treasury’s forecast that EV tax benefits will be worth £1,800 on a £35,000 vehicle in 2025, but this benefit has not fully offset the higher upfront cost.

The Express article also notes the “EV Road‑Tax Credit” – a 20 % reduction in Road Tax for electric vehicles that is slated for a one‑year pilot in 2026. Critics argue that this is a temporary fix that will not address long‑term cost drivers.

4. Consumer Perception and Market Dynamics

The article underscores a mismatch between consumer expectations and reality. A survey from the Consumer Voice group found that 48 % of UK drivers believe EVs are “significantly cheaper” than conventional cars. However, the data shows that, after accounting for subsidies, EVs remain on average 15 % more expensive than comparable gasoline models.

This perception gap is partly driven by:

• Higher upfront cost – even if operating costs (fuel, maintenance) are lower, buyers often focus on the sticker price.
• Limited financing options – banks are cautious about providing long‑term loans for high‑value EVs due to depreciation concerns.
• Lack of standardised resale markets – used‑car pricing for EVs is still inconsistent, making buyers wary.

5. Outlook: Will Prices Stabilise?

The article concludes with cautious optimism. Several trends suggest that costs could flatten in the next 2–3 years:

Nevertheless, the Express article stresses that price volatility will likely persist, and consumers should weigh long‑term savings against higher purchase costs. For policymakers, the challenge lies in balancing environmental goals with affordable pricing – a delicate act that will shape the UK’s automotive future for years to come.

Quick Takeaway

• Battery costs have surged, driving the bulk of the EV price increase.
• Supply‑chain bottlenecks (chips, raw materials, logistics) add further cost layers.
• Government policy changes – both subsidies and taxes – influence market dynamics.
• Consumer perception is outpaced by reality, making the high upfront price a barrier.
• Future price stabilization hinges on scale‑up, new battery tech, and policy incentives.

The Express feature, while concise, offers a compelling snapshot of the complex economics that govern electric vehicle pricing today. For readers looking to invest in an EV, the article serves as a reminder to look beyond headline subsidies and scrutinise the full cost of ownership – and for policymakers, it underscores the need for balanced incentives that don’t inadvertently inflate the very prices they aim to reduce.