Is owning an EV more cost-effective in the long term?
It’s an ongoing debate on the total cost of ownership (TCO) of electric vehicles (EVs) and other powertrains. As energy prices soar and supply chains get more complicated, it largely falls on careful calculations to see if fleets will thrive with powertrains or continue to stick to internal combustion engines (ICEs).
Surely, there are too many variables in calculating TCO for powertrains and ICEs. Nevertheless, the most recent studies give us a glimpse into the costs of powertrains, while the comparison generally ends up putting EVs and ICEs side by side.
A study by the US Department of Energy’s (DOE) Argonne National Laboratory of last year takes into account the below factors for calculation:
- Purchasing cost,
- Financing and fuel costs,
- Insurance costs,
- Maintenance and repair,
- Taxes and fees.
The powertrains taken into account in the research are ICEs, hybrid electric vehicles (HEVs), plug-in hybrid vehicles (PHEVs), fuel cell electric vehicles (FCEVs) and battery electric vehicles (BEVs). The results favour all-electric vehicles (BEVs), as these powertrains’ maintenance cost is 40% lower than ICEs.
BEVs also become favourable in time compared to HEVs in terms of cost, as battery prices come down. The insurance costs, taxes and fees of light-duty vehicles vary in different US states, generally having a higher registration fee for alternative fuel vehicles. Also, the depreciation rate of older EVs is much higher than new ones.
What about other parts of the world?
A study published this year shows the complexity of long-term costs in Thailand. The authors provide two scenarios in which they take government subsidies or retailer discounts and battery prices into account.
If there’s a 5% and 15% of price discount for PHEVs and BEVs, respectively, their TCO is lower than that of an ICE after the fourth year of ownership. But the TCO of PHEV and BEV goes up again in the eight-year period due to battery replacement.
If there’s a 60% battery discount for both the EV and PHEV, the TCO does not change before battery replacement for both EVs. After the battery replacement, the TCO of the PHEV goes down slightly.
The study highlights the fact that depreciation plays an essential role in the PHEV and BEV costs due to the variability and user anxiety in EV technologies.
Also, without government subsidies or retailer discounts, HEV and PHEV are more favourable in Thailand’s urban areas; their TCO is almost 10% lower.
What about hydrogen?
The cost of FCEVs is expected to drop as the price of hydrogen goes down. But this expectation doesn’t provide a clear picture for FCEVs in the long term. When we look at the US market, only California and Hawaii have hydrogen stations as of 2021; California has around 50 active hydrogen stations, according to h2fcp.org.
There are few models to choose from, and they are not cheap. The 2021 Honda Clarity, 2022 Hyundai Nexo and 2022 Toyota Mirai are prominent models with a price tag ranging between $35,000 and $58,000.
If you live in California and Hawaii, owning a Toyota Mirai would be quite cost-effective as Toyota provides a $15,000 hydrogen card, which covers three years of fuel. According to climate-xchange.org, one kg of hydrogen gas is around $16.
What about leasing?
An article on Bloomberg this year notes the leasing option to easily switch to a powertrain and become more cost-effective. In their example, an Uber driver owning an ICE Toyota Camry hops into a Tesla Model 3 through a lease from Hertz.
Calculating the essential maintenance, insurance and other costs, the weekly cost of the leased Tesla Model 3 appears to be around $450, while Camry requires $600. Prices depend on different models and cost calculations vary, especially if you choose a cheaper EV, such as Nissan Leaf.
An all-electric light-duty or medium and heavy-duty commercial vehicle is more favourable in the long term, as connected technologies significantly lower the maintenance and insurance costs and provide optimum energy consumption and charging fees. Considering the collective encouragement of electrification worldwide through automakers, governments and regulators, BEVs will continue to rise as petroleum and diesel prices increase and hydrogen infrastructure is limited.