EV Economics: A Cost-Benefit Analysis of Electric Vehicles
EV skeptics are quick to proclaim the higher upfront costs of electric vehicles and their limited range compared to gas powered cars. But while these arguments may have been true when the first electric cars hit the market a few years, they no longer pass muster today.
Today’s EV landscape is vastly different than the one three years ago, with technological innovation, improving infrastructure, and higher fuel prices making them an increasingly viable consumer option. In fact, if one were to take a life cycle analysis of electric vehicles, they pay for themselves by applying basic laws of economics.
In this article, I’ll provide a brief cost-benefit analysis of electric vehicles in an attempt to shed some light on the long-term economic benefits associated with buying an EV.
The Financial Cost of Electric Vehicles
Upon first glance, it may seem that electric vehicles have a higher upfront cost than the average gas powered car. And while this is certainly true in many cases, it doesn’t account for the host of subsidies or the life cycle savings inherent to electric vehicles.
Take the Ford Focus Electric. With a price tag of $32,490, it is a whole $9,000 more expensive than the gas powered version. However, when you factor in the $7,500 federal tax credit, the Ford Focus becomes $24,990. Many states also have their own subsidies available. For instance, in the state of Colorado, the state chips in another $6,000, making the price almost $4,500 cheaper than the gas powered Focus overall. If you buy the car in Illinois, the price decreases by $4,000, and in California the price decreases by $2,500 due to state subsidies.
Therefore, anyone interested in buying an EV right now would likely not have to shell out much more than if he/she were to buy a similar model gas powered car.
On top of the initial subsidies available, electric vehicles can save consumers a huge amount of money over the car’s lifespan. Now, of course the price of electricity changes depending on where you charge up your car. But regardless of where you decide to charge your car, the price of electricity pales in comparison to refueling a gas powered car. An often quoted average is $2-3 per charge, but many places will have rates hovering around $1.50.
On top of that, maintenance costs are way cheaper in an electric car than a gas-powered car.
Overall, you’re likely looking at an economic savings in many cases, right from the initial purchase through to the end of the car’s lifespan.
Should Consumer’s Be Anxious About Range Anxiety?
One of those intangible costs associated with buying an EV is the influence of range anxiety. Without a doubt, the majority of electric vehicles have lower range than most other cars. The Ford Focus electric gets about 74 miles per charge, the Nissan Leaf gets about 73 miles, and the BMW i3 gets between 81 to 91 miles of range. The standout amongst electric vehicles of course is the Tesla Model S with a range of 265 miles.
However, statistics on how far consumers typically drive reveal some interesting insight. The average American drives roughly 30 miles per day, which is well within the range of all of the above electric vehicles. Longer trips over 300 miles constitute less than 5% of all trips that current drivers might need to take. According to the Union of Concerned Scientists, roughly 42% of Americans could make the switch to electric without having to alter their driving habits.
Lifespan Costs of EVs Will Decrease Over Time
Finally, the lifespan costs associated with EVs will drop over time – these are benefits even consumers who buy an EV today will experience.
First there’s the obvious savings of avoiding fossil fuels. The price of gas has already gone up considerably over the past 10 years and shows no sign of slowing down. The overall trend is towards higher fuel prices, and thus higher expenses attributed to driving around in a gas powered car.
Secondly, improvements in battery technology will make replacing EV batteries cheaper in the future. Presently, battery technology is improving by 6-8% every year. By 2020, this could mean batteries would cost between $5,200 and $6,500, far less than their current price tag of around $12,000. While critics often highlight the high prices associated with replacing the battery down the road, they fail to take into account the considerably lower prices for these batteries in the future.
Electric vehicles are far cheaper than many people realize when one accounts for subsidies available, lower maintenance costs, higher fuel prices, and improving technology. The lifespan savings inherent to an EV are its key selling feature when looking exclusively at their financial viability over the long-term.
However, on top of the economics, there are also the environmental benefits associated with choosing an EV. Environmental benefits are incredibly difficult to account for in a cost-benefit analysis in any tangible way, but they are certainly important.
One of the reasons I haven’t relied on the environmental benefits associated with EVs is because they are by now quite obvious, and are probably the biggest selling feature of EVs. However, hopefully I’ve proven that EVs make sense purely on an economic level for a consumer that is looking to save money over the long-term while also contributing to a sustainable future.
Joseph Tohill is a freelance writer and online communications specialist for organizations in the sustainability sector. He has a B.A. in Interdisciplinary Studies from the University of British Columbia and spent most of his academic career studying sustainable urban development; namely the interdisciplinary relationship between built form and natural environment.
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