The Reduced Cost of Electric Vehicles

Before proceeding to the cost side of the pure electric vehicle, or battery electric vehicle (BEV), we must first define what an electric vehicle is. Simply put, an electric vehicle is a car powered by one or multiple electric motors rather than a traditional internal combustion engine. EVs use a large battery pack to power the electric motor(s). To provide power or fuel to the car, the battery pack must be charged. To do so, the vehicle must be plugged in to a charging station or wall outlet. Electric vehicles emit zero exhaust compared to the way a traditional fossil fuel burning vehicle does through its exhaust system. EVs also do not contain the typical liquid fuel components such as fuel pump, fuel line or fuel tank. In addition to BEVs, the electric vehicle sector includes plug-in hybrid electric vehicles (PHEVs) and hybrid electric vehicles (HEVs), but they are not considered 100% electric as they are powered by both an electric motor and internal combustion engine inside. This report will focus solely on battery electric vehicles (BEVs).

Cost of Electric Vehicles:

The primary cost factor associated with EVs is the battery pack. This is because EVs do not contain the components of internal combustion engines that require periodic maintenance. EV systems generally consist of just a battery and an electric motor that does the useful work. A common electric vehicle battery pack has a capacity ranging from 10-100 kilowatt-hours (kWh). For example, the Mitsubishi i-MIEV has a battery capacity of 16 kWh and a range of 62 miles, and the Tesla Model S has a battery capacity of 100 kWh with a range of 400 miles. In early 2010, the price of an electric vehicle battery pack was over $1,000 per kWh. That has been reduced to $150 per kWh in 2019. By the end of 2023, the average battery pack price will be close to $100 per kWh, or even less according the latest forecast from BloombergNEF (BNEF).

According to BNEF forecasts, by 2030 the battery market will be worth an estimated $116 billion annually. This does not include investment in supply chains. However, as cell and pack prices are falling, purchasers will continue to get more value per battery pack purchase.

The life cycle cost analysis of a vehicle that was driven 12,330 miles per year over the span of 10 years, given certain economic factors, show that even with higher initial costs, battery powered vehicles are lower in cost compared to conventional fossil fuel burning vehicles. When considering two of the lowest-cost variant vehicles in both the EV sector and the conventional vehicle sector, a Nissan Leaf and a Hyundai Elantra, respectively, the Leaf’s 5-year annual cost, including salvage value, is $5,360/year compared to the Elantra at $7,076/year. The results over a 10-year lifetime show the Leaf at $4,683/year and the Hyundai at $6,040/year. These results are primarily due to the lower fuel cost of electricity versus gasoline. The Leaf’s estimated fuel cost is $3,919, while the Elantra fuel cost is $10,931 over a 10-year period. A considering two more popular plug-in electric vehicles, the Chevrolet Volt and Toyota Prius, values for both vehicles, over a period of 10 years, put the Volt at $6,286/year and the Prius at $6,156/year.

The results from a case where the federal government incentive of $7,500 was excluded also shows that the LCC values of a Leaf over a 10-year period are less than the Hyundai when salvage value is considered. The Leaf was estimated at $5,369/year compared to the Hyundai at $6,040/year. For a 5-year period, this result also proves to be true. The Leaf was estimated ate $6,733/year while the Hyundai was $7,076/year.

Figure 2: 5-Year Financed Ownership Cost

Even though EV technology was a higher initial cost, the operation and maintenance cost savings give EVs lower life cycle costs compared to conventional gasoline vehicles (for those vehicles that are reasonably priced). The analysis also demonstrates that a PV system of about 4 kilowatts in size would supply the required electrical energy for an electric vehicle traveling the yearly miles assumed.

Cost Comparison of 26,000 Miles: Tesla Model 3 vs. a Gasoline Powered Car:

There are two primary ways to charge a Tesla Model 3: at home and occasionally at Tesla Supercharger. To charge at home you can plug in the vehicle to a typical 120-volt outlet through a Level 1 charging cable and the vehicle will slowly charge. To calculate the energy energy consumed at home from charging the vehicle, one must determine how much time it took for the vehicle to charge. The Tesla Model 3 conveniently provides the total kilowatt-hour used on the dashboard. In this case below, it used a total of 6160 kilowatt-hours. and the cost of electricity in figure 3 is about 7.4 cents per kilowatt-hour, so that’s a total of $456 on charging.

Figure 3: electricity bill

However, that is assuming 100% charging efficiency. When considering more realistic scenarios, some degree of charging efficiency is lost due to heat transfers and powering some of the background systems such as Bluetooth, Wi-Fi, or the battery cooling system. Therefore, it’s safe to say that you’re only getting about an 80% charging efficiency, which raises the cost to $570 for at home charging over the course of a year. That’s a $43 increase, on average, in the electricity bill every month.

Charging at home can be very slow. Typically, one can only get about 5 miles of range for every hour charged. This is not a problem when considering the fact that a car owner can leave the car to charge throughout the night and have a full battery by the time they are ready to drive in the morning. If a car owner has a 240-volt outlet installed, they can charge their vehicle much faster. The second option for charging a Tesla vehicle is using the Tesla Superchargers. These are higher efficiency charging stations that Tesla has built and sold. One can get up to 200 miles of range for only 15 minutes of charge time with a total cost of $61, which brings the total charging cost for the entire year to $631.

Now, if we compare the above results to a gasoline car, lets say that a normal gasoline car gets about 29 MPG in the city and 36 MPG on the highway. Including the traffic conditions, we’ll consider the estimated cost to be about 30MPG. Let’s assume the gas price to be $2.50 cents per gallon. With these assumptions, it would have cost $2216 to travel the same distance in the gasoline car.

Additionally, one must keep in mind that gas cars require regular oil changes, unlike electric vehicles because they don’t have an internal combustion engine. Over the span of 26,000 miles a gasoline power car requires an estimated 5 oil changes. These oil changes have a total estimated cost of $225, bringing the total cost operation of the gasoline powered car to $2441. In short, the Tesla Model 3 saves a driver over $1810 over the span of 26,000 miles. This is because charging is considerably cheaper than paying for gas, and the cost of maintenance is also considerably cheaper. These savings continue to add up beyond the 26,000 mile scenario.

Although the Tesla Model 3 has a higher purchase price than an average gasoline car, the tax incentives, low charging costs, and low maintenance costs make the Model 3 worth it in the long run.