Inquiry case example - The supply of EVs

In Europe and North America, car makers are

gearing up to make 2022 the year of the electric
car. The automotive market is going to see a wave
of new models launched by leading manufacturers
such as BMW, General Motors, Honda and Fiat. The
number of electric vehicle (EV) models available to
buyers will jump from fewer than 100 to 330 by
2025.

Electric vehicles have also become cheaper. Industry data shows that the prices of EVs have fallen
from an average price of $64,300 to $55,600 in 2021. A lot of this is down to Tesla’s success in selling
its Model 3, which has a starting retail price of $39,000. Tesla now dominates the US EV market with
nearly 80% of EV sales.

Changes on the supply side of the electric vehicle market are crucial to its growth. The cost of
batteries, a key component in EVs, is becoming cheaper and the number of EV producers in the
market has increased significantly. Many countries are also offering subsidies to encourage people
to buy them. These factors have increased the supply of electric vehicles and are a key factor behind
the growth of the market.

Question
Explain the effect the falling costs of batteries and improvement in technology in the production
of electric cars will have on the supply, market price and output of electric vehicles. [10]

Investigation
Research into another market where technology is having a significant impact on supply.

© Alex Smith
InThinking www.thinkib.net/Economics 1