October 15, 2010

Are Electric Vehicles cost effective?

Yes. Here's a Leaf price comparison:

First, you have to decide whether you're looking at out of pocket costs, or trying to look at underlying "real" costs. If we look at market prices paid by buyers, we have to include the credit. If we want to look at actual system-wide costs, we have to include external costs like pollution, supply security, etc. For our purposes today, let's look at out of pocket prices.

2nd, you have to decide what vehicle to compare it to. Here's what Wired magazine says:

"A nicely appointed five-door, five-passenger compact—equivalent to, say, a Honda Civic or Toyota Corolla. But it’s electric, so it’s fairly torquey—the measly 107-horsepower motor hustles like it’s got double the ponies up to 40 mph. The ride is soft but surprisingly sure-footed thanks to a 600-pound air-cooled battery under the floorboard."

http://www.wired.com/magazine/2010/09/ff_electriccars/all/1

So, a comparable vehicle would be a Corolla at minimum. Other useful analyses might be: comparison with a Prius, which Consumer Reports tells us is cost competitive with a comparable car; and overall affordability, which might need a comparison with the average US vehicle.

3rd, you have to do your cost calculations.

Now, the average driver drives about 13,000 miles per year in the US. Total Vehicle Miles Traveled is 2,982,532,000 http://www.fhwa.dot.gov/ohim/tvtw/tvtpage.cfm and total number of vehicles is 238,314,692 http://www.bts.gov/publications/national_transportation_statistics/html/table_01_11.html for an average of 12,515 miles per year. The current price is before taxes is $2.29 - with taxes, that's about $2.80 http://tonto.eia.doe.gov/dnav/pet/PET_PRI_ALLMG_A_EPM0_PTC_CPGAL_A.htm . The Corolla gets about 30 MPG per http://www.toyota.com/corolla/trims-prices.html , so the Corolla costs about $1,168 per year for fuel.

The Leaf should use about .25kWh per mile, and night time power should cost about $.055/kWh ( The average retail rate for power in the US is $.11 (the coasts have more expensive power), and night time rates should be about 50% of that (often it is much lower, occasionally wholesale rates even go negative)), for an annual cost of $172.

Other factors: less maintenance, due to a much simpler drive train and the elimination of many support systems, fluids, belts, etc, etc. An important example: brake costs will be much lower, due to regenerative braking.

Insurance costs? Insurance costs are based on many things, including theft rates, collision rates, repair costs, anti-theft system and owner behavior. A taxi owner I just interviewed told me that a Prius would cost him 40% more than the usual Crown Vic-type workhorse, but that insurance would cost no more. BTW, the extra cost of the Prius is paid for in 10 months by the fuel savings... The Prius might be a guide: anyone seen a good source?

A Corolla, financed over 10 years, would cost $23,991 ($16,850 XLE, 7% interest) + 11,680 gas costs for $35,671.

A Leaf, financed over 10 years, would cost $35,993 ($32,780 minus $7,500 rebate, 7% interest) + 1,720 gas costs for $35,714.

So, a conservative comparison gives out of pocket costs which are almost identical. Other comparisons would look even better: including state rebates (CA-$5K, TN-$2K, GA-$5k?); comparing to a more expensive Corolla; to the average US vehicle; to a Prius; or using real costs (eliminating the rebate and including the external cost of oil).

In countries like Israel or Denmark, the Leaf will be a 1st car, supported by Better Place. OTOH, I don't expect Better Place to have a big impact on the US soon. On the 3rd hand, it's worth noting that: they are trying, in places like San Francisco; many places (e.g., Tennessee!) are installing charging stations on critical paths, and that a relatively small number can make a disproportionate difference; and the Leaf has a clever built-in app that finds efficient routes and charging stations.

12 comments:

Anonymous said...

You forgot the costs of the replacement battery pack for the leaf. Currently $18k with a life span of 5-10 years according to Nissan.

Nick G said...

Good question - I didn't forget that, but I didn't explicitly discuss it.

Where did you see a cost of $18K?

Anonymous said...

http://green.autoblog.com/2010/05/15/nissan-leaf-profitable-by-year-three-battery-cost-closer-to-18/

Funny how you didn't explicitly discuss that. Since by your own calculations it puts the Leaf at a huge cost disadvantage to the Corolla even if they somehow manage to halve that cost.

Nick G said...

The Wall Street Journal got it wrong. The current cost for the battery pack, according to Nissan's supplier, is $10K and they're working on reducing it far below that - I'll add references in a little bit.

Anonymous said...

http://www.businessweek.com/news/2010-05-14/nissan-s-leaf-battery-maker-targets-lower-cost-update1-.html

"May 14 (Bloomberg) -- Nissan Motor Co., which will start selling its Leaf electric car this year, aims to cut the cost of the vehicle’s lithium-ion battery pack to less than $370 per kilowatt-hour to make a profit from the model."

So even if Nissan meets this ambitious goal the battery pack is still going to cost nearly $9k. This puts the Leaf at a huge cost disadvantage to the Corolla.

You need to correct you article.

LeftLibertarian said...

Why should he change his article for that? Nissan warranties the battery for 8 years. His numbers go to 10 years so that is only 2 years past 8 years. If you replace the battery at 8 years, you'll be able to drive for another 8 or so. And besides, how much are you going to pay for in repairs to the gas car? alternators, exhaust system, transmission, engine problems, oil changes, tune-ups, spark plugs, belts, wires, etc.

And you know what he did not include? The increasing price of gasoline. Gasoline prices are going rise faster than inflation and thus make corolla much less attractive. If anything, he understated the price advantage of the Leaf.

Anonymous said...

Maybe, maybe not.

But Nick left out a huge chunk in his analysis.

He needs to either correct or retract his original article.

BTW Edmunds says it only takes $2.8k in maintenance to bring a Corolla to 100k miles.
http://www.bankrate.com/finance/auto/think-of-car-maintenance-cost-when-buying.aspx

And Nissan concedes the maintenance of the Leaf could be as much as an equivalent ICE.
http://www.nissanusa.com/leaf-electric-car/faq/top/maintenance#/leaf-electric-car/faq/top/maintenance

Nick G said...

Anonymous - could you use a handle of some sort? That would simplify the conversation.

There are several reasons why the battery replacement cost wasn't essential to the cost analysis.

First, the battery won't die at 8 years: 8 years is the warranty period, which means that it's likely to last at least 10 years at warranty specification levels, and probably more.

2nd, the likely warranty specification (based on the Volt warranty) is, at minimum, that 70% of the charging depth will remain: many people will be content with an 70 mile range, and not worry about replacing the battery.

3rd, the average vehicle drives 50% of it's lifetime miles by the time it's 7 years old. All in all, I suspect that most Leaf batteries will last the life of the car.

Finally, battery costs are falling quickly, which means that a replacement battery in 8-10 years is likely to cost well below 50% of it's cost now. That puts the battery cost well below the additional 10 year gasoline savings.

Now, as LeftLibertarian said, fuel costs are likely to rise, and maintenance costs are likely to be lower than for ICE vehicles. For instance, Prius drivers essentially have no brake replacement costs, due to regenerative braking. The Nissan site simply says: "Maintenance costs are projected to be equal to or lower than comparably equipped gas-powered cars. " That's a conservative way of saying that you're likely to save on maintenance costs. Heck, there's no reason to think they're not including battery maintenance costs, right?

Anonymous said...

First Nissan claims a batter life of 5-10 years.
http://www.nissanusa.com/leaf-electric-car/tags/show/faqs#/leaf-electric-car/faq/view/56

So the price of the replacement battery is a very real cost since it takes 10 years to get back your initial investment. Even if the battery goes the full 10 years it leaves the Leaf at a cost disadvantage.

Second Nissan's best case scenario is a battery costing $9k. It currently costs way more than that, $18k. Even at $9k its a significant cost that you can't ignore in your analysis.

If you want to make the claim that an ICE's maintenance outweighs a Leaf's maintenance + battery costs then make the case. That you just hand wave it away does not reflect well on you.

As it stands your analysis is deliberately ignoring a very high cost for the Leaf. It needs to be corrected or retracted.

Anonymous said...

"3rd, the average vehicle drives 50% of it's lifetime miles by the time it's 7 years old."

If this is the case then you need to update your article to reflect this. It changes your calculations significantly.

Anonymous said...

"fuel costs are likely to rise,"

Again your article does not incorporate this. If you insist on making this argument you need to update your calculations to reflect this.

What you are saying is not reflected in or supported by the calculations in your article.

You can do one or the other. You can't do both.

Nick G said...

Yes, I'll have to redo the calculations to reflect Nissan's $350/kWh cost claim for their current battery cells; falling battery prices; rising gas prices; maintenance savings; battery salvage value; and lower depreciation rates for EVs.