CleanTechnica has widely published excellent 5 years total cost of ownership (TCO) articles comparing battery electric vehicles (BEVs) to similar internal combustion engine vehicles (ICEVs). A 5-year time frame is the norm for this type of analysis, as many people turn their vehicle around at this time. BEVs in these models invariably turn out to be less expensive than comparable ICEVs, all things considered, even when the purchase price of the BEV is higher. This is great to know, but if we want to understand the big picture – namely the full impact of those BEVs on all owners over the life of the vehicles – the 5 year comparisons don’t reflect this. It is clear that BEVs will continue to benefit their future owners from lower fuel costs, lower maintenance costs and potentially longer service life. A full life cycle cost analysis captures this.
Computer Modeling – Garbage In / Garbage Out
To support my work as a management consultant, I learned to write custom computer modeling programs. Off-the-shelf software for this kind of thing doesn’t exist, so I learned how to design my own analysis tools. In the analysis, ‘garbage in’ equals ‘garbage out’, so it’s super important to make sure that your inputs are sufficient and valid, plus a high degree of control over the model’s inputs.
Vehicle cost programs are relatively simple, but the models must still use accurate information and they must be transparent in their assumptions. We regularly see analysts differ in their forecasts, and the reason for this is that they use different assumptions and/or miss important inputs. If the analyst does not publish his assumptions, the reader has no way of knowing whether the projection is valid. So, what are reasonable assumptions for a full lifecycle assessment?
Assumptions
Purchase price — Purchase price varies by location and local incentives. For this analysis, I’m going to use Edmunds as the source for prices and California as the location. I’ll also include the $7,500 federal tax incentive for qualifying BEVs – recognizing that some people can buy for less and some will pay more.
Lifespan – (160,000 miles) – This number may seem low to some people, as it did to me, but we have to keep in mind that we are talking about an average. The global fleet average takes into account cars involved in accidents and/or cars that, for whatever reason, are simply not reaching their full potential. Individually, of course, cars can last longer, be they BEVs or ICEVs. I’m planning a future article on the global fleet discussing where this figure comes from.
BEV life — The idea that BEVs outlast ICEVs is something that industry analysts have largely been dancing around with since the introduction of BEVs (usually ignoring it). While it certainly makes intuitive sense that BEVs last longer given their simplicity, until recently we had zero data to know one way or another. With BEVs on the road in decent numbers for over 10 years, we have more data and writers are starting to get more comfortable with the idea that, yes, BEVs do, in fact, last longer, provided their batteries are properly thermally managed. Which BEVs and how long they last are now more of a question among industry writers, and they seem to suggest a range of 50% to 100% longer.
I’m not going to think about it too long for this article. The fact is, we’re still in the infancy of BEVs and we just don’t have all the data yet. To get around this key variable, I’m going to include two cost models, one where the BEV only lasts as long as ICE cars and one where the BEV lasts 50% longer. Readers can then decide for themselves, and either way, they can see the impact if BEVs have been shown to last 50% longer.
Miles driven — I’m going to use a number slightly above the US average (25,600 miles/year), as this is a lifetime cost model and I wanted to keep the projection at a maximum of 15 years (the US average is 13,500).
Residual value — We don’t have much information about this variable, but fortunately it is the least material in the model. I used a range between $2,000 and $5,000, taking into account purchase price and battery size, if any. The residual value of the battery is $42/kWh according to statistics. combut I chose to be conservative and limit the battery value.
Fuel consumption / costs – I used EPA government fuel economy figures, plus the IEA predicted average prices for electricity and gas in the US for 2022 at 14.9 cents/kWh for electricity and $3.97/gallon for gasoline.
repair costs – This was a tough one. I used repair cost of YourMechanic. com and cross-references with other sites. There is a big cost difference between vehicle class and make, with more expensive cars costing a lot more, and some makes like Toyota are cheaper than average. We don’t yet have good data on BEV repair costs, but the data we do have seems to indicate that a 50% lower cost is a conservative estimate. All things considered, I think I found a good rendering for this item.
Insurance — Nerdwallet.com has a good breakdown for insurance rates for the chosen vehicles. Insurance is highly variable on an individual level, so I just used the national average cost for good drivers.
financing — I assumed full financing of all cars and modeled 60 months and 6.5% interest.
Cars compared — I chose two BEVs, the Chevy Bolt EV and Tesla Model 3 LR, because both qualify for the full federal tax credit and are very popular. For gasoline cars, I’ve included the BMW 330i xDrive 2.0L as a direct Tesla Model 3 competitor, and the Toyota Prius XLE 2.0L and Toyota Corolla LE 2.0L as potential Chevy Bolt competitors.
Results
The table above compares the lifetime costs — including vehicle/financing, fuel, insurance/repairs and total costs — for the selected vehicles. At the end of the 10-year model period, each car was expected to have traveled 260,000 miles and be sold for resale value.
Put numbers on the table, the Chevy Bolt was the clear winner for lifetime cost in this group, at about $51,171, while the Toyota Corolla brought in $15,672 more at about $66,843. The Tesla Model 3 came in third at $7,000 more than the Corolla, and the Prius came in at $1,160 more than the Tesla at $75,000. The gasoline BMW was priced at $109,500, which was $35,700 more than the Model 3 LR and $58,350 more than the Bolt.
The cost of BEVs versus ICEVs when BEVs last 50% longer yielded surprising results. In the table above, you can see that the Chevy Bolt and Tesla Model 3 were expected to last 240,000 miles, while the ICE cars remained at 160,000. To achieve the 240,000 mile comparison target, 1.5 ICE cars were purchased and fuel and repairs were duly calculated. I should note that the math is not simply 1.5× to project BEV costs as repair costs increase significantly as vehicles age. For example, this model saw Tesla’s repair/maintenance costs rise to $3,660/year in year 15, more than $1,000/year more than the BMW cap! This may be higher than reality for a Model 3, but I wanted to be conservative.
In this 15-year-old model, the Bolt was the clear winner again, at just $70,200. The Corolla barely held onto second place at $100,265, while the Tesla Model 3 cost just $2,550 more at $102,800. The Prius came in third at $112,390, and the BMW turned out to cost more than double the Bolt at $164,290.
What does this mean?
No surprises — We’ve seen many 5-year analyzes comparing BEVs to ICEVs showing how the TCO for BEVs is lower for similar class vehicles, so these full lifecycle results should come as no surprise to anyone. What is perhaps surprising is how much cheaper BEVs are when their full lifespan is considered, especially for the plus-50% model.
ICEVs are no longer competitive with BEVs — This analysis suggests that new ICEVs are simply no longer competitive with BEVs. When a premium BEV like the Tesla Model 3 could potentially cost about the same as a Toyota Corolla in 15 years, and as much as $61,500 less than a same class/lower performance ICE vehicle, it won’t take long for buyers to notice.
Second-hand cars — Market price is market price, but sometimes markets do not reflect the true value of a vehicle. This phenomenon can mainly occur with new/unfamiliar products until the consumer realizes it. If BEVs really do last longer and are this cheap to own, it would make sense that they would hold more value in the used market. In fact, they should arguably depreciate about 40% slower than comparable ICE vehicles. However, we see that BEVs depreciate at about the same or in some cases even higher rates than ICEVs! This suggests that the used market for BEVs could be an absolute bargain if they actually last longer.
Ask for cheap BEVs – These projections make me wonder if BEVs under $25,000 will even be in high demand in the future. The most popular car in the world is the Toyota Corolla, with sales of 1.12 million units in 2022. This despite the fact that there are cheaper cars on the market. The fact is that most people don’t buy these cheaper cars in the same quantities because they don’t offer that much value. In other words, price is not everything. Based on history, people also tend to buy higher quality/value things if they can afford them. Since this analysis suggests that a Chevy Bolt, and maybe even a Tesla Model 3 LR, is already cheaper or as cheap as a Toyota Corolla, it’s reasonable to wonder if buyers will simply move upstream to these better cars, as they can afford it. . With BEV prices expected to fall even faster, I suspect this question is keeping many an automaker’s CEO up at night. What do you think?
By Luvhrtz
I don’t like paywalls. You don’t like paywalls. Who likes paywalls? Here at CleanTechnica, we implemented a restricted paywall for a while, but it always felt wrong – and it was always hard to decide what to put behind that. In theory, your most exclusive and best content goes behind a paywall. But then less people will read it! We just don’t like paywalls, which is why we decided to drop ours.
Unfortunately, the media business is still a hard, cut-throat business with small margins. It’s a never-ending Olympic challenge to stay afloat or maybe even — gasping for breath – to grow. So …