Why are electric cars more expensive?

The second biggest purchase a person will make is a car and many people are alarmed by the price of electric cars compared to petrol and diesel cars.

The initial cost of purchasing a vehicle is a crucial consideration for any prospective buyer. Historically, electric cars were perceived as premium options with higher price tags compared to their petrol counterparts. However, as technology advances, the purchase price gap has been narrowing. Today, many EV models are competitively priced and the overall cost of ownership is lower than petrol cars, especially if you consider the operational expenses.

Have you been considering making the switch to electric, but been put off by the higher price tag compared to a traditional internal combustion engine (ICE) car? In this post, we explore the reasons why electric cars are often more expensive than their ICE counterparts.

EV batteries are expensive

One of the main reasons for the higher cost of electric cars is the battery. The battery is the heart of an electric vehicle and is what powers the car. It’s also the most expensive component of an electric car, accounting for a large portion of the overall cost. At the moment, batteries for electric cars are still relatively expensive to produce, which is one of the reasons the cost of electric cars is higher.

The creation of EV batteries involves a mix of raw materials including aluminium, copper, iron, cobalt, nickel, manganese, graphite, and lithium. These materials are extracted from the earth, contributing to the higher cost of electric vehicles compared to their petrol or diesel counterparts. Specifically focusing on lithium, approximately 95% of its global production is in Australia, Chile, China, and Argentina. You can read more about EV batteries in our blog, what is the lifespan of an electric car in the UK?

How battery degradation affects the used car market

Lithium batteries are composed of individual cells, each consisting of a positive electrode (cathode) and a negative electrode (anode). During the charging and discharging process, lithium ions move between the anode and cathode, generating the necessary power for your vehicle.

Many EV sceptics are concerned about EV degradation - The Electric Car Scheme

The degradation of electric vehicle (EV) batteries has led to a decline in electric car prices. Many consumers are now questioning the value of purchasing an older car with an ageing battery. This dilemma prompts consumers to carefully consider the cost of buying a new electric car, which typically offers an extended range on a single charge compared to used ones.

Moreover, a significant portion of the public lacks understanding regarding what to look for when buying a used electric car. Fortunately, many EVs are equipped with diagnostic tools that provide valuable information about the battery's condition.

The technology is more complex

Another reason for the higher cost of electric cars is the technology. Electric cars rely on complex systems and components, such as the electric motor, battery management system, and charging infrastructure, that are still relatively new. As production processes become more efficient, the prices are expected to come down

Economies of scale

The lack of economies of scale is another factor that contributes to the higher cost of electric cars. There are fewer electric cars (there are now 1 million EVs on the road as of 2024) on the road compared to ICE vehicles, which means that manufacturers cannot benefit from the cost savings that come with producing a large volume of vehicles.

The government introduced electric car schemes to encourage more people to drive electric vehicles. While these incentives can be beneficial for the drivers, they add to the cost of producing electric cars, which manufacturers must pass on to consumers in the form of higher prices. 

The graph shows the growth of electric car registrations from 2019 to present day. Nearly 315,000 battery-electric cars were registered in 2023 which is a growth of 18% on the number registered in 2022. The graph has been taken from ZapMap and data is from SMMT.

Insurance can be higher

Over the last year, insurance costs for all types of cars have increased. This is attributed to several factors, such as higher prices for used cars and spare parts, a shortage of labour, longer vehicle loan durations, a surge in personal injury claims, and a decline in insurers' investment returns.

The ABI has emphasised that insurance prices are determined by risk, and claims for Electric Vehicles (EVs) are 25.5% more expensive than their internal combustion engine equivalents. Furthermore, the repair duration for EVs has been extended by 14%, influencing insurance premiums.

Recent data from insurance firm QBE provides a comparison of average repair costs and downtime between 2021 and 2023. The analysis reveals a notable 50% increase in repair costs for EVs compared to their internal combustion engine (ICE) counterparts during this period. Additionally, there has been a 10% rise in the number of days these vehicles spend off the road.

Why drive an electric car?

Although electric cars are more expensive to buy outright, the cost of running an EV is significantly less than petrol or diesel cars. The approximate annual fuel cost for a Ford Focus is £1,230 whereas, the approximate cost to charge an EV is Volkswagen ID.3 is £630. Meaning in total you would save £600 every year!

EV charging costs are less

Compared with petrol and diesel cars, an electric car is more cost-effective to run because you do not have to pay at the pump. Rapid chargers are typically located in motorway service stations and are one of the most expensive methods to charge your electric vehicle (EV). DC rapid chargers are typically rated at 50kW and can charge an EV from empty to 80% in less than an hour. As of May 2023, most network rapid chargers cost 74p/kWh, which equates to £19 for 30 minutes of charging.

Ultra-rapid chargers, with a rating of 100kW and above, can charge an EV to 80% in approximately 20 minutes. Despite being the most expensive way to charge your EV, they are perfect for those in a hurry. If you wish to delve into more information about the various types of chargers and the current state of public chargers in the UK, visit our blog post titled
"Celebrating 50,000 Electric Car Charge Points in the UK."

The cost of purchasing and installing a home charging station varies, depending on factors such as charging speed, brand, and installation requirements. Despite this initial investment, home charging stations can be cost-effective in the long run, offering savings compared to fueling up at traditional gas stations. Visit our guide to home charging here.

If you want to learn more, you can read our dedicated blog on fuel costs here.

EV maintenance and servicing are cheaper

VW ID Buzz is available to lease from The Electric Car Scheme

While electric cars are initially more expensive to purchase than their petrol or diesel counterparts, they do require less maintenance and incur lower servicing costs. The electric vehicle drivetrain has fewer moving parts compared to an internal combustion engine, making maintenance more simple and cost-effective. Concerns about battery degradation often deter potential electric car buyers, especially regarding the perceived high cost of battery replacement.

When it comes to servicing, the average cost for an electric car is £143. In comparison, servicing a petrol or diesel car would cost £174. This translates to an 18% higher servicing cost for internal combustion engine (ICE) cars than for electric vehicles, as less testing and time are required for EV servicing.

Switching to an EV is better for the environment

Electric cars emit less greenhouse gases over their lifetime than conventional engine cars, making EVs better for the environment. This is even when you consider the energy needed to manufacture and power them. Whilst EVs are better, they won’t be fully green until they can run on 100% renewable energy. Still, the UK generates more electricity from renewable energy than fossil fuels, with 43% of electricity being from renewable sources.

There are several reasons why electric cars are often more expensive than ICE vehicles. However, as battery technology improves, production processes become more efficient, and economies of scale increase, we can expect prices to come down in the future. So, if you’re considering an electric car, don’t let the higher price tag throw you off. In the long run, you may save money on operating costs and enjoy a cleaner, more environmentally friendly driving experience. 

Road tax and ULEZ savings

Save on ULEZ charges by driving an EV - The Electric Car Scheme

If you have an electric car you do not have to pay any road tax, which is currently £180 per year (2023/24). Unfortunately from April 2025, that exemption will be removed and EV drivers will have to start paying road tax. Zero-emission cars registered between 01/04/2017 and 31/03/2025 will pay the standard rate (£180) but those registered after 01/04/2025 will pay £10 in their first year and the standard rate thereafter.

The Ultra Low Emission Zone (ULEZ) has recently extended its reach to encompass all London Boroughs, excluding the M25. Within this designated area, drivers of older vehicles face a daily charge, a measure implemented to curb the high air pollution stemming from older cars in densely populated and high-traffic regions. Other UK cities like Bath, Bristol, Edinburgh, Oxford and Newcastle have implemented ULEZ chargers.

ULEZ All electric cars are exempt from ULEZ and Congestion Charges under the Cleaner Vehicle Discount until 25th December 2025. After 2025, unless in receipt of another discount or exemption, all vehicle owners (including electric vehicle owners) will need to pay a Congestion Charge zone during charging hours.


You could go electric today with The Electric Car Scheme. We help employers offer their employees the benefit of switching to an electric car through salary sacrifice.

The Electric Car Scheme helps employees save between 30-60% on any electric car through salary sacrifice. We offer the best prices available on the market all at no net cost to the employer for setting up the scheme. We provide the best prices available on the market, and there is no net cost to the employer for setting up the scheme. By participating in this initiative, employers can contribute to their team members feeling recognized and appreciated while also attracting top talent to their business. Additionally, the scheme allows companies to make a positive impact on the environment.

Last updated: 29/02/24

Next scheduled update: 29/08/24

Ellie Garratt

With a background in marketing, specialising in performance marketing, Ellie recently joined The Electric Car Scheme as a Content Marketing Executive. She is passionate about promoting sustainability, particularly by encouraging companies to consider salary sacrifice as a valuable employee benefit.

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