Continuing reductions in battery prices will bring the total cost of ownership of electric vehicles below that for conventional-fuel vehicles by 2025, even with low oil prices, says new research by Bloomberg New Energy Finance (BNEF).

The study, published yesterday, suggests that the transition to EVs could happen much more rapidly than governments and oil companies have yet realised.

It forecasts that sales of EVs will hit 41 million by 2040, representing 35 per cent of new light vehicle sales. This would be almost 90 times the equivalent figure for 2015, when EV sales are estimated to have been 462,000, some 60 per cent up on 2014.

Crucially, the study indicates that the surge in uptake will be driven by economic rather than environmental considerations. The research suggests that further, big reductions in battery prices lie ahead, and that during the 2020s EVs will become a more economic option than gasoline or diesel cars in most countries.

The transition to EVs will have implications beyond the car market. The research estimates that EVs will represent a quarter of the cars on the road by 2040, displacing 13 million barrels per day of crude oil but using 1,900 TWh of electricity. This would be equivalent to nearly 8 per cent of global electricity demand in 2015.

Colin McKerracher, lead advanced transportation analyst at BNEF, said: “At the core of this forecast is the work we have done on EV battery prices. Lithium-ion battery costs have already dropped by 65 per cent since 2010, reaching $350 per kWh last year. We expect EV battery costs to be well below $120 per kWh by 2030, and to fall further after that as new chemistries come in.”

Salim Morsy, senior analyst and author of the study, commented: “Our central forecast is based on the crude oil price recovering to $50, and then trending back up to $70 a barrel or higher by 2040 [in line with official US forecasts]. Interestingly, if the oil price were to fall to $20 and stick there, this would only delay mass adoption of EVs to the early 2030s.”

BNEF says the EV market at present is heavily dependent on early adopters keen to try out new technology or reduce their emissions, and on government incentives offered in markets such as China, Netherlands and Norway. Although some 1.3 million EVs have now been sold worldwide and 2015 saw strong growth, they still represented less than 1 per cent of light-duty vehicle sales last year.

EVs come in two categories: battery electric vehicles, or BEVs, that rely entirely on their batteries to provide power; and plug-in hybrid electric vehicles, or PHEVs, that have batteries that can be recharged but have conventional engines as back-up. The best-selling BEV over the last six years has been the Nissan Leaf, and the best-selling PHEV the Chevrolet Volt.

The study’s calculations on total cost of ownership show BEVs becoming cheaper on an unsubsidised basis than internal combustion engine cars by the mid-2020s, even if the latter continue to improve their average mileage per gallon by 3.5 per cent per year. It assumes that a BEV with a 60 kWh battery will travel 200 miles between charges. The first generation of these long-range, mid-priced BEVs is set to hit the market in the next 18 months with the launch of the Chevy Bolt and Tesla Model 3.

Mr Morsy said: “In the next few years, the total-cost-of-ownership advantage will continue to lie with conventional cars, and we therefore do not expect EVs to exceed 5 per cent of light-duty vehicle sales in most markets – except where subsidies make up the difference. However, that cost comparison is set to change radically in the 2020s.”