In order to compute price parity of EVs against ICE vehicles, the first step is to benchmark the cost of ICE vehicles for each of the vehicular categories i.e., 2W, 3W and 4W.

1. Benchmark ICE vehicles across vehicular categories

For price parity modelling, we benchmark the most popular ICE models in two-wheelers, three-wheelers, and four-wheelers across three categories mentioned below. The average prices of these models form the basis for comparison. 

1. Entry tier | Represents vehicles primarily targeted at budget conscious buyers.

2. Mid tier | Represents vehicles primarily targeted at aspirational buyers with disposable income seeking enhanced value and practically

3. Premium tier | Represents vehicles primarily targeted at premium buyers who value brand identity and performance

2. Forecasting of benchmark ICE vehicles

To forecast vehicle prices until 2035, the historical price increase from 2018 to 2023 is calculated. Using this compounded annual growth rate (CAGR),  the prices of internal combustion engine (ICE) benchmark vehicles are projected.

3. Forecasting cost of battery

There are various reputed research and analysis performed on battery price predictions. One of the most cited is by US’s Department of Energy, which has tracked historically battery prices from 2008 till 2022. Battery prices have been extrapolated till 2035 based on historical data.

4. Breakup of cost of EVs

EV costs are divided into four main categories: the battery pack (25%), the electric drive (15%), power electronics (10%), and other components (50%). Each of these categories experiences unique cost dynamics, influenced by technological advancements or inflation.

5. Computation of EV price forecast

We split the costs by component because certain elements, like battery packs and electric drives, are expected to decrease in cost due to technological advancements, while other components, such as chassis materials and tires, are subject to inflation. The model uses user-defined inputs to project how each component's cost will change over time.

Hence, considering the above, the user input cost of an EV is first divided into component wise cost as explained in point 4. Using these component costs as benchmark, the price of all of these components are estimated for subsequent years until 2035. The overall cost of an EV is then predicted by summing these component costs together.