Electric Vehicle University - 220b ECONOMICS OF EV OWNERSHIP
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THE CENTRAL QUESTION ... What are the key factors that I should consider when I try to cost justify the purchase of an EV?? COURSE ABSTRACT An introduction to the economics of EV ownership is presented. The EV purchase premium is discussed along with the qualitative examination of the factors that must be considered as an economic analysis is conducted. Fuel and maintenance costs, including battery replacement issues, are explored. To obtain a copy of the EVU study guide for this and other available EVU courses, please complete the form on this page. Course level: Intermediate
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Electric Vehicle University - 220b ECONOMICS OF EV OWNERSHIP
- 1. 1
- 2. 2 EV Economics— Basic Concepts, part 2 EV-220b This course is presented as part of Evannex University—a free, open learning environment that presents concise, video-based mini-courses for those who have interest in electric vehicles (EVs) …
- 3. Looking back at part 1 … You will pay a premium to purchase an EV, mostly due to high battery costs An economic analysis must take the premium into account Both qualitative and quantitative considerations Savings do exist but are affected by many factors 3 ?
- 4. EV—Cost of ownership Overall cost of Ownership = Fuel costs + Resale value + Maintenance costs + Repairs Consumables Support costs Insurance Financing costs Build a home charging infrastructure Tax credits
- 5. Fuel Cost Project fuel costs Gasoline today and in the future Electricity today and in the future Use fuel efficiency data MPG MPGe kWh per mile Use # of miles per year and # of years of ownership
- 6. Resale value First, note that the used car market for EVs is very new However, early data indicate that Small BEVs take a resale value hit Large BEVs depreciate at about the same rate as comparable ICE cars PHEVs do considerably better than BEVs
- 7. 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.html Maintenance ICE BEV Oil change 10 changes 0 Fluids 1 change 0 Tires 2 changes 2 changes Muffler 1 change 0 Brakes 1 change 0 Transmission Service possible none Plugs Service possible none
- 8. Battery Replacement A cost worth considering in an economic analysis, but it’s not as serious as the hype indicates BEV batteries can lose as much as 10% of their capacity at 50,000 miles and about 20% at 100,000 miles But a mildly degraded battery still works fine.
- 9. Summary There is a cost premium Costs of owning an EV break down into the same categories as the costs of owning an ICE vehicle: Fuel costs Depreciation Maintenance costs Support costs Overall, the long-term costs of owning an EV are demonstrably lower
- 10. 10 … 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
Editor's Notes
- 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 they’re affected by many factors Let’s take a look at the cost of ownership.
- >> To begin, it’s important to understand the cost components that you’ll need to 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. We’ll discuss some of these qualitatively at this point, and then quantitatively in the next mini-course in this series.
- As I mentioned earlier, fuel costs account for almost 25 percent of yearly ownership costs for ICE cars. It’s 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 future Then, >> Use fuel efficiency data for there automobiles you’re considering >> MPG >> MPGe >> kWh / mile And finally, >> Use # of miles per year and # of years of ownership to estimate overall fuel cost and fuel cost savings
- >> First, note that the used car market for EVs is very new, so it’s 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. We’ll 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 you’re buying a small BEV, a detailed economic assessment should consider the resale value differential in favor of comparable ICE models
- 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 it’s 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 that’s 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..
- >> If you intend to own your EV for many years, battery replacement cost is worth considering in an economic analysis, but it’s 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. It’s 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. That’s 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.
- Let’s 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, we’ll take a quantitative look at EV ownership costs.