The myth of EV cost savings
The White House has said you can save $80/month by just switching to an EV... But can you???
In the interest of full disclosure, let me start off that I once was the owner of an electric vehicle (possibly the least sexy looking BMW ever, the i3). I'm neither a electric vehicle zealot nor a internal combustion engine fanatic. Both have positive aspects. Both have negative aspects.
But we must have a talk about the real world costs of EVs. The oft repeated claim that the average person could save $80 per month if they switched to electric is, quite simply, not borne out by the numbers. If we are to ONLY compare the cost of powering the vehicles, there ARE cost savings with EVs compared to standard cars. But, as we will see, those cost savings aren't quite the $80 per month that has been claimed when doing a like for like comparison.
To begin we must start with some basic assumptions. In our example we will be buying a like for like new car, financed for 5 years at the MSRP value. We will then drive the national average amount of miles every year. So here are the numbers we will be working with which will be the same for both vehicles:
Average Miles Per Year -14,263
Loan Length (years) - 5
Interest Rate (yearly) - 4.9%
Sales Tax Rate - 5%
Title/Tags - $500
And we must also consider the cost to power these vehicles. So here are the current national averages for regular unleaded gasoline as well as electricity as of April 18, 2022. For our calculations we will assume that the driver always charges the vehicle at home rather than at public charging stations which can be significantly more expensive.
Regular Unleaded/gallon - $4.09
Kilowatt Hour (KwH) - $0.1375
For each of the following vehicles we will calculate a monthly cost for the vehicle which is the car payment as well as the cost to power the car. For the sake of simplicity we will leave out costs such as insurance and regular maintenance as they shouldn't meaningfully affect these calculations.
(And yes, I'm aware that you do not need to perform oil changes in an EV and brakes aren't replaced as frequently as in an ICE... but neither of these "benefits" are going to make these cost calculations much better for EVs)
So let's start with the best selling vehicles in each segment. The Toyota Camry versus the Tesla Model Y. The base price of the Toyota Camry is $25,295 and it gets a combined 53 MPG. The Model Y's base price is $41,990 while using 0.26 kilowatts of energy to go 1 mile.
So, as you can see, the cost to power the vehicle is roughly $43 per month cheaper with the Tesla. The savings in that area are real and the Camry is by no means a gas guzzler. But our issue (as we will continue to see) is the vehicle cost. The added expense of purchasing the Tesla overwhelms any realized energy savings. Every month the Tesla will cost $280 MORE even taking the energy savings into account. The break even point, assuming static prices for energy and static usage, is after more than 33 years and 477,000 miles.
“But a Tesla is expensive,” you may be saying. “This isn't a fair comparison.” So let's move to the lowest priced vehicles in each segment. The Chevrolet Spark versus the Nissan Leaf. The base price of the Chevy Spark is $14,095 and it gets a combined 33 MPG. The Leaf's base price is $32,525 while using 0.32 kilowatts of energy to go 1 mile.
Now here we do see some significant cost savings when it comes to powering the vehicle. The Leaf is $95 cheaper a month to power than the Spark. But that is where the good times end for the EV. Because of dramatic difference in price, with the Spark costing less than half of it's cheapest EV counterpart, the Leaf ends up costing an extra $269 per month. At least the break even point will come much earlier in the car's lifetime... but I wouldn't hold my breath for it. A little over 19 years and 273,000 miles later will the total cost of the two vehicles break even.
I'm loathe to do this, as tax credits are essentially making everyone pay a little for the benefit of the few... But, if we factor in the $7500 federal tax credit (which has been phased out for the Teslas in our comparisons) we still end up paying an extra $121 per month for the Leaf... and we break even after 11 years.
Next we will compare the most efficient of the two vehicle types. The Hyundai IONIQ Blue costs $23,400 while getting a combined 59 MPG. The Tesla Model 3 costs $46,990 and uses 0.24 KW to travel 1 mile.
Here we have similar numbers to our initial comparison. While the energy savings are roughly $43 per month, the money saved is easily overwhelmed by the cost of the vehicle. The Model 3 will cost an additional $423 per month! And it is almost ridiculous to mention the break even point between these 2 vehicles... but I will in the name of science. After 54 years and more than 770,000 miles would energy savings overtake the initial outlay.
The closest comparison with regards to price is between the Hyundai IONIQ Blue and the Nissan Leaf. Here we find that if you include the $7500 federal subsidy (which I'm still loathe to do) the total cost each month ends up being within $2 of each other. In this scenario you are actually saving money by the sixth year of ownership. So, if you're in the market for a Hyundai IONIQ Blue, then maybe the Nissan Leaf is worth a look.
Electric vehicles are a nice technology. For certain consumers they present a good value proposition. And one can debate the environmental impacts of the two technologies almost endlessly. But, strictly from a consumer cost perspective, it appears that EVs are currently a poor substitute for a gasoline powered vehicle.
And we didn't even get into how electric costs would likely rise if all of a sudden we all started driving EVs. Supply and Demand can be a real SoB! A rise in demand would almost certainly drive up electricity costs! But we'll leave those calculations for another day!