EV EconomicsQuantitativeIssues, part 1

EV-221a

This course is presented as part of Evannex Universitya free, open learning environment that presents concise, video-based mini-courses for those who have interest in electric vehicles (EVs)

EVCost of ownershipOverall cost of Ownership = Fuel costs +Resale value differential +Maintenance costs +RepairsConsumablesSupport costsInsuranceFinancing costsInfrastructure costsTax Credits

In the first mini-course in this sequence, we described the qualitative aspects of EV ownership. Recalling our discussion,

>> Overall cost of Ownership = >> Fuel costs +>> the resale value differential between an EV and an ICE vehicle +>> Maintenance costs which encompasses:>> Repairsthose things that might break and need repair>> Consumablesitems that need to be replaced on a regular basis, and>> Support costs that include:>> Insurance>> Financing costs, and>> infrastructure costs a fancy way of referring to the one-time costs of building a charging arrangement for your garage>> tax credits that help reduce out-of-pocket purchase costs.

Lets consider at least some of these cost components in a quantitative manner.

Fuel CostProject fuel costsGasoline today and in the futureElectricity today and in the futureUse fuel efficiency dataMPGMPGekWh / mileUse # of miles per year and # of years of ownership

vs.

As I mentioned in the first EV Economics mini-course, fuel costs account for almost 25 percent of yearly ownership costs for ICE cars. There is little debate that fueling costs for EVs are considerably lower in absolute terms and that the saving, when compared to ICE vehicles, can be significant.

To develop a quantitative value for cost savings, you have to >> Project fuel costs for>>Gasoline today and into the future>>Electricity rates today and in the futureThen,>> Use fuel efficiency data for the automobiles youre considering>> MPG>> MPGe>> kWh per mileAnd finally,

>> Use # of miles per year and # of years of ownership to estimate overall fuel cost and fuel cost savings

Calculating Fuel Cost for an EVUse numbers that are specific to the EV (PHEV) Use the MPGe for the EV and calculate approx. fuel cost based on annual mileageFuel costMPGe = (annual mileage / MPGe) x $/galAlternate approach:Use vehicle specs to determine kWh/mileavgFuel costElectricity = (annual mileage x kWh/mileavg x $/Kwh

As I mentioned, the largest differentiating component of the cost of EV ownership is the cost of fuelin this case, electricity, as compared to the cost of gasoline for a comparable ICE vehicle

To begin a fuel cost calculation, youll have to:>> get numbers that are specific to the EV (PHEV) youre considering and for a comparable ICE vehicle

>>Once you know the MPGe for the EV, its easy to compute the approximate fuel cost using the >> the equation shown on the screen.

>> An alternative approach is to use the kWh/mile >> that can be acquired from the specs for your EV or other online sources. >> Fuel cost can be calculated using the the equation now shown on your screen by multiplying your annual mileage, the kWh/mile figure you obtained from your specs, and the electricity rate on your utility bill.

Ballpark CalculationsaverageMiles per year (ages 20 - 54)15,100Miles per year (over 54)9,000Average cost of gas$3.00Average cost of kWh$0.09EV Fuel economy (kWh/mile)0.31Fuel economy (mpg for ICE)24.1ICE Vehicle Fuel Cost (20-54)$1,880ICE Vehicle Fuel Cost (55+)$1,120Fuel economy (MPGe for EV)95.0Fuel Economy (kWh/mile for EV)0.31EV Electricity Cost (20-54)$440EV Electricity Cost (55+)$262Plug-in hybrids EPA combined mpg40.1Fuel Cost-PHEV (20-54)$1,130Fuel Cost-PHEV (55+)$673

Its worth taking a look at a few ballpark calculations, using US averages for some of these values.

Between the ages of 20 and 54, the average American drives 15,100 miles per yearThose older than 55 drive an average of 9,000 miles per year

The average cost of gas over the past six months has been about $2.80 per gallon. As all of us know, that number varies dramatically year over year.

The average cost of electricity nationwide is about $0.09 per kWh, although this can vary from $0.06 to $0.15 on a state-by-state basisThe average fuel economy for ICE vehicles is 24.1 mpg, although that can vary from about 12 mpg for large luxury sedans and SUVs to 45 mpg for subcompact diesel fueled ICE vehicles

The average fuel economy for EVs is 95 MPGe, or considering energy consumption, around 0.31 kWh/mile

The fuel costs for ICE vehicles, EVs and PHEVs are shown in the red rows of the table on your screen.

On average, fuel costs for EVs are only 23 percent of the fuel cost of an average ICE vehicle.On average, fuel costs for PHEVs are about 60% of the fuel cost of an average ICE vehicle.

Substantial savings, indeed!

Resale valueFirst, note that the used car market for EVs is very newHowever, early data indicate that Small BEVs take a resale value hit of 12 - 20% less that ICE cars Large BEVs depreciate at about the same rate as comparable ICE carsPHEVs do considerably better than BEVs within 2 - 5 % of ICE vehicles

>> In an earlier mini-course, I mentioned that the used car market for EVs is very new, so its hard to draw broad conclusions about resale values

>> However, early (and relatively sparse) data indicate that >> Small BEVs take a resale value hit that can be significant when compared to comparable ICE vehiclesProjections for 5-year resale value for these vehicles average 12 to 20 percentage points less than equivalent ICE vehicles. But remember, these are projections only.

>> Large BEVs (e.g., the Tesla Model S) depreciate at about the same rate as comparable ICE cars, although most data for large EVs are anecdotal because the market is so new. For example, Edmunds reports the sale of their Tesla Model S after 17 months of driving for just about 80 percent of its new car cost-- Impressive! Note that a comparable BMW 750iL sells for about 75 percent of its new car cost after about 2 years, so the Model S depreciates at about the same rate

>> PHEVs do considerably better than BEVs with a depreciation differential of only a few percentage points less than a comparable ICE vehicle

Fuel cost & resaleFor small EVs:you will take a hit on resaleyou will save on fuelbottom line: significant issue if you purchase the vehicle and keep it only a few yearsFor larger EVs and PHEVs:only a small differential on resaleyoull save big on fuel

Fuel cost savings and the resale differential will be the major costs factors as you evaluate your costs of ownership.

>> For small EVs:>> you will take a hit on resale, although its difficult to make solid projections going forward. For now, you wont get as much money, but if gas prices rise and EVs gain broader traction in the market, resale value may change from a negative to a positive.

>> You will save on fuel. Obviously, the absolute savings are a function of your annual mileage

>> Bottom line: the resale differential could be significant issue if you purchase an EV and keep it only a few years, particularly for small BEVs

>> For larger BEVs and PHEVs:>> there is only a small differential on resale, and >> youll save really big on fuel

Well continue our discussion of quantitative cost of ownership issues in part 2 of this mini-course.

a free study guide for all EVU mini-courses is available for download from our website For a complete list of mini-courses and the study guide, visit: www.evannex.com

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