Price parity seen in US; is it time for BEV fleets?
In 2023, total cost of ownership (TCO) for a battery electric (BEV) vehicle in the United States can be less than an internal combustion engine (ICE) vehicle if you consider depreciation, the cost of energy and maintenance, as well as tax breaks and government subsidies.
Considering a light commercial vehicle (LCV) with a six-year holding period traveling 15,000 miles per year for city deliveries, the TCO for a BEV is approximately 5 cents less per mile than an ICE vehicle (some 48 cents/m vs 53 cents/m), business consultancy firm McKinsey said in a study.
For medium-duty-trucks (MDT), price parity could be seen as early as 2024 and some two years thereafter for heavy-duty-trucks (HDT), both accelerated by tax incentives of up to $40,000.
The initial cost of new BEVs is more expensive than ICE vehicles but this is offset from the start by government incentives and stronger residuals. Legislation such as the US government’s Inflation Reduction Act (kicking off March 1, 2023) provides tax and subsidy incentives reaching up to 30% of vehicle cost.
2023 Ford E-Transit, best-selling E-van in the US in 2022 (courtesy of Ford)
Electricity is 3-5 times cheaper than gasoline or diesel and this is expected to continue, according to the study. Moreover, electricity prices are much less volatile than oil prices, reflecting the many alternatives for production.
In general, a 50% increase in energy price leads to an overall TCO increase of 10-20%. With that said, electricity’s resilience to price fluctuations is a factor in its favor.
In terms of charging, while uptime problems were more apparent in the past, the uptimes and reliability of BEV charging networks today are on par with those of ICE refueling stations, according to the study.
Fleet operator opinions
- More the 50% feel that vehicle cost is a major obstacle to BEV adoption
- More than 50% also rank infrastructure investment as an obstacle
- More than 50% plan to fully decarbonize their fleets by 2027
- More than 60% plan to partner with a fleet management company
- Nearly 50% plan to partner with EV charging infrastructure providers
Fleet types benefiting
The type of fleet seen benefiting most is an LCV fleet for parcel delivery, according to the study. Considering a fleet of 6,000 vehicles, some 50% of the vehicles are expected to be BEV by 2025 and 100% by 2035.
Food product distributors for larger vehicles are also seen benefiting but to a smaller extent. Considering the same size fleet, some 15% of vehicles in a MDT fleet are expected to be BEV by 2025 and 75% by 2035. Meanwhile, approximately 10% of vehicles in an HDT fleet are expected to be BEV by 2025 and 50% by 2035.
In the end, keep in mind that the key TCO aspects to calculate in your fleet are depreciation (vehicle price, subsidies, residual value), energy costs, maintenance, and the fixed and operating costs of charging infrastructure.
And with OEMs increasingly pushing electrification by ramping up BEV production, increasing scale, and offering more competitive prices in both the US and Canada, you can expect your journey toward EV adoption to only get easier in the coming months.
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