EV EconomicsBasic Concepts, part 2

EV-220b

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)

Looking back at part 1 You will pay a premium to purchase an EV, mostly due to high battery costsAn economic analysis must take the premium into accountBoth qualitative and quantitative considerationsSavings do exist but are affected by many factors

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Looking back at what we discussed in part 1 of this EVU mini-course,

>> Today, you will pay a premium to purchase an EV, mostly due to high battery costs, and >> An economic analysis must take that premium into account.>> Both qualitative and quantitative considerations should be taken into account, and>> Savings do exist, but theyre affected by many factors

Lets take a look at the cost of ownership.

EVCost of ownershipOverall cost of Ownership = Fuel costs +Resale value +Maintenance costs +RepairsConsumablesSupport costsInsuranceFinancing costsBuild a home charging infrastructureTax credits

>> To begin, its important to understand the cost components that youll needto evaluate the cost of ownership of an EV.

Overall cost of Ownership combines >> Fuel costs +>> Resale Value +>> Maintenance costs (encompassed by:>>Repairs>>Consumables>> Support costs (that include:>>Insurance>>Financing costs>> Building a home charging infrastructure>>In addition, federal, and in some cases, state tax credits are available for certain classes of EVs. These reduce the initial purchase price and help defray the so called EV premium that currently exists.

Well discuss some of these qualitatively at this point, and then quantitatively in the next mini-course in this series.

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

vs.

As I mentioned earlier, fuel costs account for almost 25 percent of yearly ownership costs for ICE cars.

Its important to determine how much can be saved by getting your fuel from a wall socket in your garage as opposed to getting your fuel at a gas station.

First,

>> Project fuel costs for>>Gasoline today and into the future>>Electricity rates today and in the futureThen,>> Use fuel efficiency data for there automobiles youre considering>> MPG>> MPGe>> kWh / mileAnd finally,>> Use # of miles per year and # of years of ownership to estimate overall fuel cost and fuel cost savings

Resale valueFirst, note that the used car market for EVs is very newHowever, early data indicate that Small BEVs take a resale value hit Large BEVs depreciate at about the same rate as comparable ICE carsPHEVs do considerably better than BEVs

>> First, note that the used car market for EVs is very new, so its hard to draw broad conclusion about resale values Also, any resale value projections of more than two years represent best estimates, not actual data.

>> However, early (and relatively sparse) data indicate that >> Small BEVs (e.g., Nissan Leaf, Ford Focus Electric, Chevy Spark) take a resale value hit that can be significant when compared to comparable ICE vehicles. Well discuss the amount in the second mini-course in this sequence.

>> 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.

>> PHEVs do considerably better than small BEVs with a resale value differential of only a few percentage points less than a comparable ICE vehicle.

So, if youre buying a small BEV, a detailed economic assessment should consider the resale value differential in favor of comparable ICE models

Maintenance Costs electric vehicles partially compensate for high initial purchase prices by granting owners savings up to 35 percent in maintenance costs. The Institute for Automobile Economics (IFA) http://www.plugincars.com/study-electrics-35-less-costly-maintain-comparable-ice-vehicles-125755.htmlMaintenance ICEBEVOil change10 changes0Fluids1 change0Tires2 changes2 changesMuffler1 change0Brakes1 change0TransmissionService possiblenonePlugsService possiblenone

The Institute for Automobile Economics (IFA) reports that

>> electric vehicles partially compensate for high initial purchase prices by granting owners savings up to 35 percent in maintenance costs. This study was conducted in Europe for cars that traveled only 5000 miles per year, far below US averages. But its fair to assume that addition miles traveled would increase, not decrease maintenance costs.

The table on the right of your screen illustrates the different maintenance required for ICE vehicles and EVs over 50,000 miles or about 5 years.Most of the typical maintenance expenses encountered for ICE vehicles simply disappear for EVs. Also note that the relative inconvenience and time associated with auto maintenanc visits are reduced considerably. Most EVs require only a yearly service visit, and thats it.

You may wonder why we show a brake caliper change for ICE cars, but not for EVs.There is MUCH less brake wear for EVs because of regenerative braking, so brake calipers need to be changed infrequently..

Battery ReplacementA cost worth considering in an economic analysis, but its not as serious as the hype indicatesBEV batteries can lose as much as 10% of their capacity at 50,000 miles and about 20% at 100,000 milesBut a mildly degraded battery still works fine.

>> If you intend to own your EV for many years, battery replacement cost is worth considering in an economic analysis, but its not as serious some media hype indicates

>> BEV batteries can lose as much as 10% of their capacity at 50,000 and about 20% at 100,000 miles,assuming the typical number of charging cycles associated with that level of mileage

>> But a mildly degraded battery still works fine. You get less range, but otherwise, your EV keeps operating with no ill effects.

Its likely that by the time you might have to replace your battery, (say at about 150,000 to 200,000 miles, costs will likely be in the $100 - $200 per kWh range, meaning that a large 85kWh battery (for the Tesla Model S, say) might cost about $8500 to replace.

Thats about the same cost as replacing an ICE engine and transmission, which might need to be replaced in the same timeframe as an EV battery replacement.

SummaryThere is a cost premiumCosts of owning an EV break down into the same categories as the costs of owning an ICE vehicle:Fuel costsDepreciationMaintenance costsSupport costs Overall, the long-term costs of owning an EV are demonstrably lower

Lets summarize,

>> There is a cost premium when you by an EV. The question is, do you get that premium back (and more) due to savings in the costs of ownership?

>> The Costs of owning an EV break down into the same categories as the costs of owning an ICE vehicle:>> Fuel costs>> Resale value>> Maintenance costs>> Support costs (insurance, financing and home charging infrastructure costs)

>> Overall, the long-term costs of owning an EV can be demonstrably lower

In the next EVU mini-course in this sequence, well take a quantitative look at EV ownership costs.

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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