June 5, 2013

EV Price Slashed: Now Is It Competitive? -
a Cost Comparison Tutorial

Electric vehicles are touted as the way to drastically reduce the nation's transportation carbon footprint, especially once we have managed to transition our electricity grid away from fossil-fueled utilities, such as coal-burning plants. But so far sales of EVs have been anemic.

The disappointing sales figures partly stem from the driving public's doubts about the batteries, that are optimised within a narrow temperature range, and which are expensive to replace. But even without this concern, the hefty price premium on most EVs are a real deterrent, even if you take into account the $7,500 support the Federal government offers towards the purchase of an EV.

That is about to change, as several manufacturers of EVs have decided to drastically cut the MSRP of their EV offerings. The Nissan Leaf went from $35,200 to $28,800, and the monthly lease on a Honda Fit EV went from $389 to $259 a month. With these hefty cuts, EVs come into range for a lot more people.

So let us sit down and see if now it makes sense to buy an EV rather than a conventional gasoline-powered car. Obviously, there is some math involved here, but I promise it's nowhere near as bad as, say, your Federal tax return. If you've passed middle school, you can do this.

Like all good tutorials, from building a tool shed to sewing cloth diapers, I will show the finished product up front. (Sorry, no pretty pictures in this post: this is a cost estimate. After all, there are no pretty pictures on your tax return forms, either).


  Nissan Leaf Honda Fit EV
Purchase Cost $ 21,300 $ 9,324
Operation Cost $ 4,854 $ 1,567
TOTAL $ 26,154 $ 10,891
Comparison Vehicle (gasoline) Nissan Versa
Honda Fit
(1.8S Auto)
Purchase Cost $ 15,460 $ 7,700
Operation Cost $ 21, 429 $ 5,806
TOTAL $ 36,889 $ 13,506
EV Savings $ 10,735 $ 2,615
Annual Savings $ 1,074 $ 872

Figuratively speaking, this forms a pretty picture indeed: in the long term, there are big savings to be had from choosing an EV over a conventional car. Read on to see what assumptions go into these numbers, and how to do this estimate for yourself.


How to figure the cost.

To do this, we'll figure out the cost to own and drive the EV for ten years, and compare that to the cost to own and drive a gasoline car in the same category. I chose ten years of ownership because it's a round number, and because ten years is the length of time over which Toyota guarantees the batteries in its Prius model; if you intend to keep your EV beyond ten years you may want to include the price of replacement batteries in the calculation.

For annual miles, I use 15,000 miles, close to the nation's average. You can estimate your own annual miles by dividing the number of miles you've put on the car, by the number of years you've owned the car.


Purchase Cost.
The purchase price of the car includes the MSRP and any applicable Federal tax credit:

PURCHASE = MSRP - Fed tax credit.

To keep things simple, I don't consider the costs of financing which vary from person to person. And since interest rates are so low, including the financing costs will not be wildly different from using the straight MSRP.

Operation Cost.
The total cost of running the car depends on the number of years you intend to own it, the number of miles you drive in a year, the fuel efficiency of the car, and the price of fuel. For a gasoline car, that's straightforward:

OPERATION-G = # Years * annual miles * $/gallon / MPG

In the equation above, the price of gasoline is the wildcard: you need to put in your best guess of what gas will cost during the next ten years. Currently, the US average for regular unleaded is $3.63 a gallon as reported by GasBuddy.com. I am not optimistic that we will see a drastic reduction in that price in the next decade, so I use a cautious average of $4 per gallon (even though I personally believe it is likely to go above that).

The running costs for an EV is very similar, except that you need to use MPG-e for the fuel efficiency. Since you don't pay for your electricity by the MPG-e but by the kiloWatt-hour (kWh), you need to multiply the MPG-e number by 0.0292 to get the fuel effciency in miles per kWh, so:

OPERATION-EV = # Years * annual miles * $/kWh electricity /                                                            (0.0292*MPG-e)

You know better than anyone how much you pay for electricity; for our example I'm going to use the current national average rate, $0.12 per kWh. This is another wildcard: the price of electricity will likely be strongly influenced by the price of natural gas, which in turn is tied to the controversial fate of all those fracking operations, as well as the future of the solar photovoltaic installations now just coming online.

Now we're ready to do some comparisons.

Nissan Leaf vs. Nissan Versa Hatchback
Within the Nissan lineup, the Versa Hatchback is the car that is most similar to the Leaf, so I will use that as an example. If you follow the steps below, you can do the math for the gasoline car of your choice.

Let's start with the Leaf: its real-life efficiency is 127 MPG-e; the price is $28,800, and it qualifies for the Federal tax credit:

PURCHASE = MSRP - Fed tax credit.
PURCHASE-Leaf = $ 28,800 - $ 7,500 = $21,300

OPERATION-EV = # Years * annual miles * $/kWh / (0.0292*MPG-e)
OPERATION-Leaf = 10 * 15,000 * $0.12/kWh / (0.0292*127) = $ 4,854

TOTAL-Leaf = $ 26,154

For the Nissan Versa Hatchback, I chose the 1.8S Manual version, because it has the lowest MSRP: $15,460, and the highest fuel efficiency: 28 mpg. Of course, the Federal tax credit is zero.

PURCHASE = MSRP - Fed tax credit.
PURCHASE-Versa = $ 15,460

OPERATION-G = # Years * annual miles * $/gallon gasoline / MPG
OPERATION-Versa = 10 * 15,000 * $4/gallon / 28 = $ 21,429

TOTAL-Versa = $36,889

There you have it: at today's gasoline and electricity prices, the average US driver will spend, over a period of ten years, $ 10,735 less on the electric Leaf than on the gasoline Versa, a savings of $ 1,074 per year. Even before the price cut it would have made more sense to buy the Leaf, but not by such a clear margin.

The more you drive, the larger the advantage of owning a Leaf, in terms of expenses. The higher the price of gasoline rises compared to the price of electricity, the better off you are with a Leaf than with a Versa. Even at 15,000 annual miles, the difference between paying for gasoline (for the Versa) and paying for electricity (for the Leaf) is a staggering $ 16,575.

(At savings like that, who cares that the protruding headlights make the car look bug-eyed? I mean, the VW Beetle is even officially named a bug, and it has earned enduring popularity through the decades).


Honda Fit vs Honda Fit EV
Next, let's take a look at the Honda Fit EV, which is only available on a three-year lease at $259 per month. As it happens, Honda is currently offering a special on the gasoline-powered Fit, also a three-year lease at $220 a month; this will make a nice apples-to-apples comparison. The fuel economy is 118 MPG-e for the EV and 31 mpg for the regular Fit with auto transmission.

For the three years, the total cost to lease and run the car is:

PURCHASE-FitAuto = $ 7,700
OPERATION-FitAuto = $ 5,806
TOTAL-FitAuto = $ 13,506

PURCHASE-FitEV = $ 9,324
OPERATION-FitEV = $ 1,567
TOTAL-FitEV = $ 10,891

The difference in total expenses is $ 2,615 over three years, so the yearly saving is $ 872. When the special offer on the gasoline Fit expires, the savings will be larger. Again, these numbers are for the average US driver. But now you know how to put in numbers which are appropriate for your personal case.


Money savings vs. carbon savings.

Money-wise, the choice is very clear: unless you don't drive very much at all, you end up saving bucks by driving the electric car. Even if, like me, you drive 8,000 miles per year, it's still worth buying the EV. But the real attraction is that the EV is potentially the road to zero, or at least very low, carbon emissions.

Whether or not choosing the EV actually decreases your carbon footprint compared to driving a conventional car, depends on where you get your electricity from. If your utility generates its electricity at coal-burning plants, an EV is not that much better than a gasoline powered car, despite the "zero emissions" slogan, meaning no emissions from the tailpipe. Well duh: an EV has no exhaust line on its tail. However, effectively its tailpipe is the smokestack of the power plant that generates its electricity.

Shrink That Footprint has a great infographic on EV carbon emissions in various countries. The countries in which EVs do best are those which are far along in the transition away from fossil fuels, like Paraguay (hydro), Sweden (hydro/nuclear) and Iceland (hydro/ geothermal).

In Norway, where nearly all electricity is generated from hydro so the "zero emissions" tag is actually accurate, the Leaf has been the second best selling car this spring, despite its price tag of NKr 240,690 (US $ 41,400). The best seller is the new VW Golf, whose NKr 242,300 (US $ 41,700) price tag does not reflect tax breaks that the Norwegian government bestows on electric vehicles.

Just to remind you that cars are still dirt cheap in the US.

Family Eco-car vs. boys' eco-toy.
Finally, a word about why I haven't mentioned Tesla. The current incarnations of the Tesla fall into the muscle car category (albeit with novelty muscle): it should be classed with the Porches, Lotuses, Camaros and other "sports" cars with more than 400HP under the hood. You don't buy any of those to save money; au contraire, part of their appeal is their very expense.

So until Tesla starts manufacturing cars for families, it will not be part of the broader energy transition. But real family EVs, like the Leaf and the Fit EV, will pave the way. Especially now that they start to fit in better with the math of family finances.


Shared at Green Living Thursdays.



You may also like:
1. "List Price" around the world, or Cars are Cheap in the US
2. Boys with (Electric) Toys
3. The charged issue of electric cars



  1. Great post! Unfortunately in California, the tax rebate expired on all but the most electric of cars (Volt, Prius Plugin, Leaf, etc.) Thanks for posting to Dude, Sustainable! Green Living Thursdays @ www.dudesustainable.com

    1. But the Federal tax credit is still there (for now): up to $7,500, nothing to be sneezed at.

  2. The big problem I see with the electric vehicles is their range and the anxiety that people might get because of it. In LA, it would be very difficult to have a Leaf, but I would definitely go for a Volt. I've driven both and love the Volt, although I wish it had one more seat.

    1. I agree with you, you really need to match your EV to your daily commute (and factor in such things as possible detours due to accidents or construction). BMW has a pilot program where if you buy an EV, the can provide you with a loaner gasoline car for your longer out-of-town trips. Brilliant idea!


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