Total cost of Ownership - Electric Vehicle

Electric Vehicles Prove to Be Cost-Effective in the Long Run

Electric vehicles (EVs) are becoming increasingly cost-effective compared to gasoline-powered vehicles. Studies on the total cost of ownership (TCO) over a few years period is found that all EVs were either the same price or less expensive to own and operate than their gasoline counterparts.

 

If we need to consider two primary factors contributing to the long-term cost-effectiveness of EVs, they are;

• Lower Running Costs: EVs benefit from significant savings in fuel and maintenance expenses compared to gasoline vehicles, outweighing the initially higher purchase and insurance costs.
• Government Incentives: The incentives and tax credits directly reduce the initial investment required for purchasing an EV, making them more financially appealing.
  

Key Findings:

• Significant Lifetime Savings: EV owners could potentially save money over the vehicle's lifespan if compared with spending on ICE counterpart.
• Higher Upfront Costs Offset by Savings: While EVs generally have higher purchase and insurance costs, these are outweighed by substantial fuel and maintenance savings.
• Impact of Government Incentives: Incentives and tax credits play a crucial role in reducing the upfront cost of EVs.
  
• Declining Battery Prices: As battery technology advances and production scales up, battery prices continue to fall, further enhancing the cost advantage of EVs.

Methodology:

A typical methodology from Environmental Defense Fund (EDF) for US is shown here. Total cost of ownership analysis considered mainly four factors, which are:

• Vehicle Costs: Manufacturer's suggested retail price (MSRP), sales tax, trade-in value, financing costs, registration fees, and home charger costs for EVs.
• Fuel Costs: Projected gasoline and electricity prices, including residential and public charging rates, based on data from the US Energy Information Administration.
• Insurance Costs: Estimates derived from Edmunds' Total Cost of Ownership tool.
• Maintenance Costs: Based on research from Argonne National Laboratory, revealing lower maintenance costs for EVs compared to gasoline vehicles.
• Driving Patterns:  Different driving scenarios, including "Rural" and "Urban" driving patterns with varying mileage, driving styles, and charging behaviors are taken into account.

What to consider when buying an EV: Other than cost, one need to consider the following

1. Charging Logistics and Infrastructure:

• Home Charging Availability: Assess the feasibility and cost of installing a home charger, especially if you intend to rely heavily on home charging. This might involve evaluating your electricity grid connection, potential upgrade costs, and any associated installation fees.
• Public Charging Accessibility: Research the availability, cost, and convenience of public charging stations in your area and along your usual routes, particularly if home charging is not readily available or if you frequently travel long distances. The analysis highlights that public charging, especially DC fast charging, is significantly more expensive than home charging.

 2. Driving Requirements and Usage Patterns:

• Daily Commute and Travel Needs: Evaluate whether an EV's range aligns with your daily driving needs and typical travel patterns. Consider factors like commute distance, charging opportunities during the day, and the availability of charging infrastructure for longer trips.
• Climate and Temperature Considerations: Be aware that extreme temperatures, both hot and cold, can affect EV battery range. Research how different EV models perform in your region's climate conditions.

3. Resale Value and Battery Degradation:

• Long-Term Value: While the sources factor in a trade-in value, they don't explicitly address the long-term resale value of EVs after 10 years. Consider that battery technology is evolving rapidly. Potential buyers of older EV models might be concerned about battery degradation and limited range compared to newer models. These factors can potentially impact resale value.
• Battery Warranty: Thoroughly research the battery warranty offered by different EV manufacturers. A comprehensive battery warranty can provide peace of mind regarding potential battery degradation issues.

4. Vehicle Features and Preferences:

• Beyond the cost and practicality considerations, explore the features, styles, and functionalities offered by different EV models. Test drive various options to determine which vehicle best suits your driving preferences and lifestyle needs.

 

Reference:

Electric Vehicle Total Cost of Ownership Analysis Summary Report by Environmental Defense Fund, Published July 2023