We recently took a look at the new electric cars that are charging into the automotive market, despite the obstacles they still face in displacing the gasoline-powered vehicles that are still king of the road. One reader raised a simple, but excellent question, because it really is at the heart of why EVs are expected to be so slow to swipe market share from conventional oil-dependent cars.

“Electric cars don’t run on air,” the reader noted. “How much does it cost to travel a mile highway and city? I’ve never seen a figure to allow comparison with gas.”

Actually, the U.S. government has long had a great web site, http://www.fueleconomy.gov, that allows U.S. consumers to make just that sort of comparison. Using the energy efficiency figures available there and information on state and federal tax breaks, it’s easy to see that fueling an electric car is much cheaper than tanking up with gasoline. And yet, it’s not enough to offset the current price premium of buying an EV.

Take the 2012 Nissan Leaf, which the U.S. government estimates requires 34 kilowatt-hours to travel 100 miles.  Assuming the U.S. average electricity rate of 12 cents per kilowatt-hour, that’s $4.08 to travel 100 miles. The 2012 Hyundai Elantra, a popular, fairly efficient gasoline vehicle, gets 29 miles per gallon driving in the city and 40 mpg on the highway, the U.S. government reckons. Using the current average gasoline price, $3.83 for regular, that’s a cost of $13.20 for 100 miles of city driving or $9.58 for all-highway driving. Fueling the gasoline car is more than double the cost of fueling the EV, and it’s triple the cost for urban driving.

But the initial price to buy a new Leaf, at $37,250, is 44 percent higher than the Elantra ($20,595), based on the top manufacturers’ suggested retail prices cited fueleconomy.gov. The Leaf’s price pain is eased by the federal tax credit of $7,500, and for drivers in California, the state clean vehicle rebate of $2,500. With the tax incentives, the Leaf costs 32 percent more than the Elantra.

It would take nearly six years for the EV fuel cost savings to pay back the $6,655 initial price premium for the California consumer who chooses a Leaf over an Elantra, based on average U.S. driving habits outlined and the current gasoline price at fueleconomy.gov. In states without rebates as generous as California’s, the payback would take longer. Only if gasoline prices skyrocketed to $15 per gallon would consumers see a payback period in less than a year for the original outlay required for the Leaf.

These are the harsh economics behind Toyota’s announcement last week to dramatically scale back EV production targets, and analyst pessimism about EV market share, and the branding of some vehicles as “compliance cars” built only to clear regulatory hurdles, not to form the foundation of a new viable business.

The calculations, of course, would be different in other countries; Europe’s current average gasoline price, $7.78 per gallon due to aggressive tax policies, might appear to make the EV payback period quicker, but electric prices also are higher in Europe. Even more important: Europe’s drivers drive far less per year than U.S. drivers—a factor that would tend to slow the payback period. Moreover, the wide availability of competitively priced diesel vehicles gives European motorists more choice of high fuel economy vehicles that are not EVs.

In the words of Toyota’s vice chairman and development chief, Takeshi Uchiyamada: “The current capabilities of electric vehicles do not meet society’s needs, whether it’s the distance cars can run, or the costs, or how long it takes to charge.” We’ve examined the effort underway to improve energy storage technology—”Pictures: Seven Ingredients for Better Electric Car Batteries“—as well as automakers’ overall effort to improve fuel economy. It’s all aimed at reducing the cost of EV technology, which already succeeds handily in reducing the cost of the energy needed to propel a car.

Comments

  1. Alyssa Giles
    Melbourne, Victoria, Australia
    November 26, 6:36 am

    Hello Marianne!!
    Thanks for this beautiful Blog. Its quite good to know that we people are thinking about this crucial issue of prices hikes and fuel efficiency

    I am also in the Energy Business. We here in Australia badly effected from the Gas and Electricity Price Hikes. So in my view there is only one cheapest solution lasts after controlling your uses and that is Comparing the Energy Prices for your providers with the others.

    In some Areas there are many Energy Service Providers are there but all have different plans and different rate lists for different kind of Households. So you can choose between those households and can Save a lot of money and Energy too.
    it will be a win win for all us because in future Energy is Going to be our biggest money.
    I ca suggest you a great Energy prices comparison Provider App service i.e. http://www.texoenergysaver.com
    Log on to compare.

  2. kikilu
    cambodia
    September 15, 2:44 am

    Hey Hey! there are a people who are fighting idea. As you know I have 50 gasoline cars in my house, But I event don’t pay on gasoline. The idea from the people are not make sense to me. Any gasoline car is more modern that electric car and safer than too. It my great idea for me. Please throw out your idea and support gasoline car like me Don’t car about the environment. Do the one which is make you easier and which you happy about to do. Don’t focus much on it.

  3. JaneN
    Chicago area
    February 17, 3:10 pm

    A month ago I bought a 2013 Ford C-Max Energi plug-in hybrid for less than the price I was offered for a diesel wagon, our primary alternative choice. That is after the $4,000 federal tax credit. So I do not feel I am looking at a “payback period”. I’m nearing 500 miles and nowhere near in need of a gas fill-up. For people like us who do not commute in the car but use it for around the town jaunts and road trips, this fills the bill. I may install a small solar panel for my home charging station, but our electricity rates here are lower than the national average, so it is not running much cost for charging.

  4. GP
    Japan
    January 9, 6:36 pm

    In her rather crude financial analysis of the cost of electric vs gasoline automobiles, the author, Ms. Lavelle, overlooks two critically important owner strategies that significantly reduce both initial purchase price and running cost of an electric vehicle.

    First, one can dramatically reduce the initial purchase price by buying a pre-owned yet still relatively new Leaf. On average, a year-old Leaf sells for about $14,500 – $18,000 here; I paid $15,000 for mine.

    Second, solar panels are now VERY cheap and can reduce the running cost to zero depending on location and size. My roof-mounted system (30 x 200w panels = 6KW) produces more energy than I use including recharging my Leaf on an annual basis. The cost of the system including panels, inverter, mounting hardware and installation was $5,000.

    Thus, $20,000 total investment in solar power and electric car resulted in zero eco-friendly emissions (feels good), zero residential electricity cost (feels even better) and zero automobile fuel cost (feels great).

  5. Brus
    Charlotte, NC, USA
    July 25, 2013, 8:16 pm

    I drive 50 miles each way to work. The leaf running with ac on, only gets about 70 miles a charge. As long as I can only charge the car at home, I can’t buy an electric car. Our government, our employers, and the auto industry need to come up with a way to charge the EV, while i’m at work, at the mall, etc. Until this happens, electric cars will not be an option for myself, and I’m guessing a good majority of prospective owners here in the states.

  6. Ralph
    Eugene OR
    June 24, 2013, 10:58 am

    The article says it takes six years to save enough money to cover the extra cost of the car, and then concludes six years is too slow? That makes no sense to me. Any investment that pays back what you put in within six years and then keeps paying more for ANOTHER six to twelve years sounds like a pretty sound investment to me.

    But this shouldn’t just be about money. There are many things in my life that I pay MORE money for in order to feel happy about my life, such as buying free range eggs. There is no payback time. It never saves money, only costs me money. But I do it anyway. My major motivation for owning an electric car is reducing my carbon footprint. The fact that it’s an investment that, over the lifespan of the vehicle, will pay back double or triple what I put into it is icing on the cake.

  7. Ling
    March 10, 2013, 4:22 pm

    @Chris Jackson You’re basically saying that only rich people should worry about the environment. Currently electric cars are much more expensive than gas cars, so of course people would want to know how long it would take to make up the cost difference to determine whether their initial investment is worth it to them. The crude truth is that not many people care about the environment more than they care about themselves. And maybe these comparisons haven’t been done with other vehicles because the only other ones commercially available are petrol and diesel, which I don’t believe have nearly as great a cost difference as does electric.

  8. KL
    December 30, 2012, 12:27 pm

    The Leaf’s price pain is eased by the federal tax credit of $7,500, and for drivers in California, the state clean vehicle rebate of $2,500. With the tax incentives, the Leaf costs 32 percent more than the Elantra.

    ——–

    So, why not have a govt subsidy for the entire cost of the car, then EV’s would really be cheaper than gas powered!