Here are the 10 reasons why we’re forecasting lower prices for electric cars in the next 12 months.

Pricing for all goods is affected by supply and demand. Supply of new electric cars has increased hugely this year, due in part to more brands electrifying more of their models, and due also to the new Government rule (called the Zero Emissions Vehicle mandate) which stipulates that 22 per cent of every car maker’s range must be pure electric. In order to make sure car brands met this target in January, some of them held back putting their electric cars on sale until 2024 kicked off. Result? Lots of supply, at just the point when demand started dropping off, thanks to the Government pushing back the 2030 deadline for the sale of new petrol and diesel cars to 2035, and thus spreading uncertainty and confusion among drivers about when to make the switch.

There’s that thorny supply-and-demand issue again. Supply of used electric cars is higher than it’s ever been, as more people come to the end of their first three-year finance deals on an electric car, and sell them, joining the existing pool of used electric cars which is increasing with every year that goes by, now the market is starting to mature (some electric cars like the Nissan Leaf, Tesla Model S, BMW i3 and Renault Zoe have been with us for a decade now). Add to that a lack of demand due to many consumers not realising there is a used market for electric cars, and other consumers worried about battery health and performance in preloved electric cars (a myth that we do our best to bust here at Auto Trader Towers), and you have imbalance in the market, which means a big hello to consecutive months of price drops (we saw 13 of those during 2022-2023).

It’s not often we find ourselves thanking Elon Musk for anything, but last year he slashed the price of the Tesla Model 3 by an astonishing £8,000. Such is the influence Tesla has in the market as one of the most sought-after electric car brands that Tesla’s competitors all started either dropping their own prices or offering better finance deals. Musk has suggested there could be more price cuts to come, which means the rest of the market will have to respond, again.

BYD made the headlines at the end of last year by knocking Tesla off the top spot for electric-car sales worldwide. This is mainly because it sells gazillions of them in China, but now it’s in the UK with the Atto 3, Seal and Dolphin. It will be joined next month by Omoda, with Zeekr, Hiphi and Nio on the horizon. Not forgetting MG, and Ora, already here and making waves. What do all have in common? The ability to slash pricing much lower than their European rivals, who are already struggling with profit margins on expensive batteries. In China, BYD sells the Dolphin for £13,000. In the UK, it’s £25,000. Even factoring in export and retail costs, BYD has a heathy safety net to fall back on, should it need to grow market share in the UK, so stand by for price drops.

5. Electric price gap

Even if the Chinese brands weren’t threatening European traditional car makers with their ability to reduce prices, the likes of Volkswagen, Vauxhall, Volvo and any other brand not beginning with a V would have to make moves in 2024, in order to get the upfront cost of a new electric car closer to that of its petrol equivalent. We call this price parity, and a few years ago, Auto Trader predicted we’d reach price parity between petrol and electric in 2025, yet the price gap - on average 35 per cent - has barely shifted. That’s mainly due to the stubbornly high prices of raw materials and energy needs for manufacturing, rather than brands’ desires to turn a quick buck. But now, faced with a stagnating market for electric car purchases, brands face a decision: drop (prices) or die.

Whoever gets in (OK, when Labour gets in), one policy will be surely inescapable: the need to cut VAT on public energy from 20 per cent to 5 per cent, which is the current tax on domestic energy. Without that move, public charging costs for electric-car drivers will remain as expensive as paying for petrol, which is no way to encourage people to make the switch. It also highlights the continued social inequality around electric cars: those who can afford to live in properties with their own driveways can benefit from very cheap charging, while those renting or living in flats have to use the much more expensive public charging network. It’s so clearly non-sensical that the House of Lords published its report on electric cars this month following extensive consultation (including with us here at Auto Trader), and adopted our campaign for the Government to equalise VAT in its summary report. No brainer, surely.

OK, we hear them when they say they’re never bringing back a grant to buy an electric car, but man cannot buy an electric car on stick alone: carrots must be found. And here’s one: free city-centre parking for electric cars. Here’s another: what about no road tolls for electric cars? And another: what about no VAT on electric-car purchases for the next three years, as posited by the Society of Motor Manufacturers and Traders (SMMT)? There’s three right off the bat: come along now.

Nearly half of all buyers considering electric are willing to switch car brands. Our data shows consumers look at an average 13 different brands when deciding which electric car to buy, versus just 10 brands when considering which petrol car to buy. In other words, they’re anyone’s, so aggressive pricing by brands will capture the consumer.

And cheaper, and cheaper. That’s partly to do with economies of scale, partly to do with repatriating the extraction and processing of raw materials in order to save carbon, partly to do with the on-shoring of gigafactories to build batteries where the cars are made, and partly to do with the fact that we’re learning how to do more more repairs and more remanufacturing, too. That’s why the circular economy should matter to us all, outside of environmental concerns: it makes things cheaper, too, in the end. Whoop.

Ok, so this is less to do with electric cars getting cheaper, and more to do with petrol and diesel car ownership getting more expensive this year. Oil prices are set to increase in the second half of 2024, pushing up pump prices again, which will mean that even the most expensive electricity prices at the ultra-rapid motorway points, will become cheap by comparison. And if you have home charging on an overnight low-cost tariff, you’ll be laughing all the way to the bank.