Fact and Fiction: AFFORDABILITY
Today the perception is that most electric cars are still more expensive than their gas equivalent sticker price. This is not true in many countries, depending on rebates and tax treatment.
However, to fully measure the price difference between electric cars and a gas car, we must compare the entire lifetime cost. Servicing and maintenance, as well as the difference between gasoline prices and electricity costs need to be taken into account. Resale values also need to be considered, as this is still evolving for electric and hasn't matured with the same predictability you get with gas cars.
Gas is extraordinarily cheap, cheaper than orange juice and bottled water in some countries. For now, when comparing the cost over the lifetime of an electric car versus a gas car I'm going to just assume United States gas prices, even if they are artificially low.
One of the other issues in comparing the cost of gas versus electric cars, is that most manufacturers have started at the top with luxury models first. These high-priced cars are often €10,000 higher for electric than their gas equivalent, but that needs to be taken into the context of the total cost of those cars. While paying €10,000 more for an electric car seems a lot more, some of these cars cost as much as €100,000, so it's just 10% more in those cases. Paying 10% more for a cheaper to run car may be worth it over the lifetime of that vehicle.
A 2018 study from the University of Michigan's Transportation Research Institute found that electric vehicles cost less than half as much to operate as gas-powered cars at an average of $487 per year to run, versus $1,117 for a gas car.
Parts need replacing in gas cars, the bigger and more complex the part, the more the cost. With electric cars, having far fewer moving parts means they require massively less maintenance.
Tires do wear out faster in an electric car because of the greater amount of torque and instant acceleration being applied to the wheels, but thanks to regenerative braking, brakes wear less.
If you plan to keep your electric car for just three to five years, there's a very good chance you will spend nothing on servicing and maintenance.
Depending on how much mileage you do, and where you live, typically the cost per mile for electricity is 38% of the gasoline equivalent. The average cost per mile for a gasoline powered car is 9.3 cents in the United States versus 3.6 cents for an electric car. These numbers will of course vary considerably depending on where you live, if you live in Saudi Arabia you will pay just $0.91 for a gallon of gas, that’s just 23 cents per liter, 34 times less expensive than if you lived in the Netherlands.
It's not just the gas price savings or the lack of lifetime maintenance cost that makes an electric car potentially far more attractive - they may last virtually forever! The electric car world is new, gas cars
have been around for over 100 years and typically they run for around 13 years. It's too soon to see how long an electric car will last. Sure, eventually the battery will degrade, and right now most electric cars can't have their batteries easily replaced, but apart from that, there’s not much else that can wear out. In theory you could drive your electric car for decades. This means all the traditional depreciation models we have for gas cars don't really apply yet to electric cars.
In certain countries annual road tax is low or even zero for electric cars. In other countries, parking charges are lower and city congestion charges, as in London, is zero for electric cars while it is £12.50 for a gas car to enter London's congestion zone.
I am deliberately not giving you a side-by-side table style comparison of a gas car versus an electrical equivalent, because it's really hard to pick a fair like for like car model. The performance of electric cars, in terms of horsepower and acceleration for example, is far superior to most of their equivalent sized gas cars. However, in the mid segment and luxury segments, today, most electric cars are 10% to 20% more expensive on sticker price, even with government rebates. When you consider the lifetime savings of an electric car versus gas this increase reduces to around 8% to 15% over a gas car. You could argue that paying 8% to 15% more for the benefits of driving an electric car and the air quality and climate impact is worth it, but unfortunately for most people paying this green premium isn't within their budget just yet.
But parity for gas versus electric pricing is getting very close. In some countries, with rebates and higher gas prices, electric cars already are on par with the gasoline equivalent over their lifetime. As battery technology improves, and economies of scale begin to kick, we will near the point, probably by the end of 2022, where an electric car is more affordable over its lifetime than the gas equivalent.
Research firms and industry followers sometimes claim this has already happened, and that is the case in some certain markets, but most analysis points to between 2022 and 2025 at which EVs become more affordable than gas. For example, BloombergNEF’s analysis predicts lithium-ion battery costs will fall to the extent that electric cars will match the price of petrol and diesel cars by 2023 and McKinsey’s Global Energy Perspective 2021, forecasts that “electric vehicles are likely to become the most economic choice in the next five years in many parts of the world”.
FICTION: Electric cars are more expensive to buy and own than gas cars. Electric cars are years away from being cheaper than the gas car equivalent.
FACT: To properly compare the cost of a gas car versus an electric car there are many variables, including where you live, how much you pay for gas, how much you pay for electricity and what government incentives are available. On average an electric car will cost at least 10% more to buy than the gas equivalent, however over the lifetime they now get close to parity. We are less than two to three years away from the point by which electric cars are cheaper to buy and own than a gas car.
