For automakers small and large, old and new, transitioning to a mostly electric future has not been an easy endeavor. Or a cheap one.

With the established “legacy” car companies, this has meant ramping up battery and software operations—and learning to make EVs correctly—while keeping profits up by selling gas-powered cars. For the startups, it has meant scaling up production systems for years, typically by selling more expensive EVs first, while trying to survive long enough to even become profitable. 

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Regulations, Climate And Profits Make A Complicated Mix

Automakers are being pushed toward a mostly zero-emission future by tough new climate regulations across the world. But pivoting their businesses to EVs is tough while being under pressure from investors to keep profits up. 

So just how much money are car companies losing on EVs right now? According to one estimate from Boston Consulting Group, as much as $6,000 per EV sold around $50,000.

That data comes to us from BCG’s new study, “Can OEMs Catch the Next Wave of EV Adopters?” which we also covered here. 

“We estimate that most [automakers] currently lose around $6,000 on each EV they effectively sell for $50,000, after accounting for customer tax credits,” the study said. “We also estimate that [automakers] will only be able to close half of this cost gap by making the right technology choices; economies of scale as automakers ramp up production will help, too, but they won’t make up the difference.”

I was struck by the specificity of that figure, so I reached out to Andrew Loh, Managing Director and Senior Partner at BCG and an author of the study, to learn more. 

Here’s how they landed on that $6,000 number. 

“Take a $60,000 ICE vehicle,” Loh said. “A reasonable level of profitability that we’ve seen historically from ICE vehicles is about 10%,” he said, stressing that vehicle profit margins exist over a broad range but that number is generally true of mass-market automakers with a strong presence in the U.S. 

“Creating the bridge from ICE to EV, you need to add the cost of the battery, which is about $10,000,” Loh said. “You add the e-powertrain and incremental electronics, which is about another $5,000. And then you need to add the incremental investment and labor and overhead,” which tends to be higher because few EV operations exist at scale right now. 

Add about another $1,500 per vehicle for plant investments, engineering and other capital costs. Now subtract the ICE powertrain, which Loh said is around $4,000 per vehicle. “That’s what gets you to minus 10% [profits], or minus $6,000, as opposed to plus $6,000 profitability.”

In other words, it just comes down to high capital costs right now in the early stages of EV development, being built at operations that aren’t yet fully at scale.

There are obvious exceptions to this, of course. Tesla has been solidly profitable for years, again owing to its manufacturing scale; stable profits were regular especially once it got its Chinese factory rolling. China’s BYD is also profitable from making EVs. And luxury automakers in the U.S. are profitable with them too, because they can be sold at much higher prices; BMW, Porsche and Audi are just a few examples. 

Again, the startups have this problem too, but in a different way. New operations like Lucid, Fisker and Rivian are believed to lose money on each car until they can cross the so-called “Valley of Death” and reach mainstream, volume sales. 

So BCG’s $6,000 number isn’t a hard and fast rule for every brand or price point, but a general example of what’s at stake for cars sold for around $50,000—still close to the average new car price in America. 

But Loh and the other study authors note that unless automakers make a bigger retreat from EVs, this is a sort of temporary situation. New battery and carmaking plants are being built all of the time in the U.S. alone; new manufacturing techniques and battery chemistries are being developed to raise range while lowering costs; and nearly every automaker is finding ways to get into the cheaper $25,000 range, while still being profitable with them.

He just warned that the ultimate goal of “profitable, at scale, EV production” may be further off than some experts think. 

“A lot of people have focused in on the cautionary tone of the [report,] and we certainly want to be balanced,” Loh said. “We, as a firm, continue to be optimistic about EVs over the long run. The word of caution was more around, if you expect [this new generation of EVs], to all of a sudden, reverse the fortunes, we’re not sure that’s going to happen completely.”

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