How to Compare the Cost of Electric and Gas Cars

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.