EV EconomicsBasic Concepts, part 1

EV-220a

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)

The truth of it all Its all well and good to buy an electric vehicle to save the planet or because its the latest cool thing, but what about your pocketbook? Unfortunately at the moment electric vehicles cost more to purchase than equivalent gasoline or diesel powered ones. Altruism goes only so far, and many people are unwilling to spend much more to purchase a different vehicle just because it is cleaner. You can argue that this is short sighted because we all need to take strong action to avert various crises, but these people have a valid point about the economics of the situation.David Herron, http://greentransportation.info/life-cycle/cheaper-to-drive.html#sthash.lpg125QW.dpuf)

In a mid-2014 article at greentransportation.info, David Herron speaks bluntly about the EV economics. To quote Herron:

>> Its all well and good to buy an electric vehicle to save the planet, or because its the latest cool thing, but what about your pocketbook?

>> Unfortunately at the moment electric vehicles cost more to purchase than equivalent gasoline or diesel powered ones.Altruism goes only so far, and many people are unwilling to spend much more to purchase a different vehicle just because it is cleaner.

>> You can argue that this is short-sighted because we all need to take strong action to avert various crises, but these people have a valid point about the economics of the situation.

>> That leads to a fundamental question. It is possible to economically justify the purchase of an EV?

The answer is yes, although a variety of factors influence the size of the economic benefit.

In this mini-course, well talk about some of the basics that can help you to understand how to evaluate the economics of EVs.In part 2, well consider the quantitative aspects of economic analysis in a bit more detail.

The EV Purchase PremiumIt is true that EV buyers pay a premium for their automobilesBut that premium can be offset by the long term costs savings associated with owning an EVBut is the offset real?Key factors:length of ownershipthe cost of gas and electricity during the term of ownership

>> It is true that EV buyers pay a premium for their automobiles.

On average, an EV costs between 10 and 20 thousand dollars more than an equivalent ICE vehicle. A PHEV can cost as much as $15,000 more. The chart on your screen represents the cost of an equivalent ICE car in blue and the EV premium in yellow.

Most of the cost premium can be attributed to the relatively high current cost of batteries, although other market factors also come into play.

>> But many argue the EV cost premium can be offset by the long term costs savings associated with owning an EV.>> But is the offset real?

>> That depends on >> the length of ownershipwill you own the car for 3 years, or 10. Obviously, the longer you own, the bigger any accumulated annual savings will be

>> the cost of gas and electricity during the term of ownershipgas prices can fluctuate wildly.

At the moment, gas is selling for under $3.00 a gallon, but six months ago, it sold for well over $3.00 a gallon.The cost of electricity varies significantly from state to state.The current national average for a kWh is 9.84 cents, but some state utilities charge under 7 cents and others over 15 cents.

In addition, other factors come into play. Well consider those later in this mini-course.

In honesty Not every EV buyer does a detailed economic analysis. In general, car purchases combine quantitative and qualitative analysisThe purchase/lease of an EV is no differentThe qualitative component may dictate the buying decision

>> In honesty, Not every EV buyer does a detailed economic analysis. Some dont know how. Other dont have the inclination to do so.

>> In general, car purchases combine quantitative analysis (for some) and a strong qualitative (emotional) component for most.

>> The purchase/lease of an EV is no different .

At the current time, I think its fair to state that EV buyers tend to be slightly more technical than the average car buyer, and are somewhat more inclined to crunch the numbers in an effort to justify their buy decision. But Im not sure that really matters.

>> For many EV buyers, the qualitative componenta strong desire to see EVs happen for any of a number of reasonsprobably outweighs quantitative arguments.

Having said that Its worth running the numbersBut what numbers do we run and how do we generate them?compare the ownership costs of an EV against the ownership costs an an equivalent ICE vehicleFuel costs (ICE vehicle) ~ 25 % Maintenance cost (ICE vehicle) ~ 8 %

Having said that

>> It is worth running the numbers

>> But what numbers do we run and how do we generate them?

>> Its a good idea to compare the ownership costs of an EV against the ownership costs an an equivalent ICE vehicle.

The Pie chart on the right of your screen provides a breakdown of yearly ownership costs for an ICE vehicle that travels about 15,000 miles per year.

>> For an ICE vehicle, the cost of fuel (lighter purple slice) accounts for almost a quarter of the total yearly cost to own.

>> Vehicle maintenance (orange slice) accounts for about 8 percent.

These represent opportunities for savings when EVs are considered. But more on that later.

Apples to ApplesCompare the EV youre considering to an ICE vehicle that is similar in:Size (both passenger and storage capacity)Performance (acceleration, handling)Interior and exterior aestheticNissan Leaf Nissan VersaChevy Volt Chevy CruseVolkswagen eGolf GolfTesla Model S BMW 7 series or Mercedes S series

It seems obvious, but the only way you can accurately determine the savings you achieve is to>> compare the EV you want to an ICE vehicle that is comparable. Apples to apples.

The key factors are>> Size (both passenger and storage capacity)>> Performance (acceleration, handling, braking, cornering)>> Interior and exterior aesthetic

For some EVs or PHEVs, its possible to compare the manufacturers quasi-equivalent ICE model. For example,

>> Nissan Leaf Nissan Versa>> Chevy Volt Chevy Cruse>> Volkswagen eGolf Golf

>> But for a BEV like the Tesla Model S, its necessary to consider other comparable premium ICE vehicles such as BMW 7 series or Mercedes S series

None of the comparisons arent perfect but they dont have to be. As long as you compare apples to apples, youll get a feel for the EV premium on one hand, and the potential long term cost savings of owning an EV on the other.

In part 2 of this mini-course, well consider the constituent costs that comprise the overall cost of ownership for an EV.

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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