Building cheaper electric cars: Experts outline 10 design strategies to reduce material costs

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Electric vehicles account for an increasing share of new car production, while manufacturers face pressure from high manufacturing costs. Many established brands still produce electric cars in smaller quantities than hybrid or internal combustion engine models, as subsidies decline and price-sensitive buyers gain importance. However, demand is not falling: sales continue to rise in most major markets, with batteries still accounting for up to 35 percent of total vehicle costs according to McKinsey analysts.

The analysis shows that production costs vary by 20 to 50 percent among different electric vehicle models. About one-third of these differences stem from material and design choices, another third from process efficiency, and the remainder from factors such as subsidies or lower supply costs. Targeted technical design decisions can reduce material costs by 10 to 25 percent. According to the consulting firm, early decisions regarding technology, requirements, architecture, system integration, and development management are crucial in this regard.

A key lever is reducing energy demand so that smaller and cheaper batteries are sufficient. Improvements in aerodynamics, weight, rolling resistance, electrical architecture, drive system, and thermal management can enhance efficiency. In the case of a pickup, one manufacturer reduced the battery size by 13 percent according to the study while increasing range by four percent compared to a competing model, resulting in approximately $2,000 lower battery costs per vehicle. A design approach focused on actual customer benefits ensures that components provide only the functions and features customers truly need and value, thereby avoiding unnecessary material and design overhead.

Technology selection and system integration as key cost levers

The choice of technology also determines costs, reliance on raw materials, and scalability. Switching from nickel-rich battery cell chemistries such as NMC (Nickel-Manganese-Cobalt) or NCA (Nickel-Cobalt-Aluminum Oxide) to LFP (Lithium-Iron-Phosphate) can result in direct material savings of $750 to $1,500 for a 75-kWh vehicle, according to the study. For power electronics and engine topology, costs, efficiency, and material dependencies must be balanced against each other. The analysis indicates that for a mid-size SUV, an optimal combination of power module, battery chemistry, and engine topology can yield savings of $400 to $1,000 per vehicle.

Additional advantages lie in system integration, function bundling, and reduced variety of options. Inverters, electric motors, and gearboxes can be combined into integrated drive units. A unified thermal management system can connect the battery, interior, drive train, and power electronics, allowing the battery size to be reduced by 1 to 1.5 kWh. Fewer configuration options can save $150 to $400 per vehicle, while shared hardware and software-based function activation further reduce complexity. By bundling multiple functions into single components, sub-systems can also be avoided. Structural battery packs can even take on tasks typically performed by the vehicle’s body structure.

Platforms, Standardization, and Electronics in Focus

Flexible platforms are designed to support multiple drive types and vehicle categories with a higher share of common components. Shared tools, components, and logistics can reduce investments and simplify procurement and operation, while new derivatives can be developed on existing platforms within months rather than years. Manufacturers can also review adopted technical requirements before they are implemented in hardware. According to the study authors, consistent requirement management can save $120 to $240 per vehicle even before any redesign or supplier negotiations take place.

Another approach is to pursue greater standardization on supplier-optimized components rather than developing custom solutions for each vehicle program. The goal is to reuse fewer optimized components across multiple platforms and vehicle lines, thereby aggregating volume. The electrical and electronic architecture also holds potential: it accounts for around five to ten percent of total bill of materials costs. Zone-based architectures can reduce cable and copper requirements by up to 30 percent while simultaneously lowering assembly efforts.

Generative artificial intelligence can support development processes from identifying customer requirements, through specification and design, to validation. It can explore more design options, analyze cost-performance trade-offs, and reveal optimization opportunities earlier, but it does not replace engineers’ technical judgment.

The ten levers described by McKinsey are not exhaustive according to the consultants. Additional factors mentioned include the decision between in-house production and outsourcing, platform strategy, and a strong procurement function. Targeted optimization of product costs through design is described as a fundamental approach to reducing costs, improving efficiency, and making affordable electric vehicles more widely available.

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About the author

Thomas Langenbucher is an expert in electromobility with professional experience in the automotive industry and finance sector. Since 2011, he has been covering electric vehicles, sustainable technologies, and mobility solutions for ecomento.de. Learn more.

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