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Does a reduce “total cost of ownership” boost electric automobile sales?

In 2015, battery-electric vehicles in Japan, the UK, California, and Texas were rather cheaper than normal gas or diesel vehicles—as prolonged as you’re comparing all these vehicles using their sum cost of tenure (TCO).

Although low-emissions vehicles are mostly some-more costly by plaque cost than inner explosion engine (ICE) vehicles, low-emission vehicles turn some-more cost-effective over time if you’re counting the fuel costs you’ve avoided along with any taxation breaks and incentives. A organisation of researchers from the University of Leeds tracked the TCO of low-emissions vehicles between 1997 and 2015 in Japan, the UK, California, and Texas. In 2015 in particular, fuel costs and subsidies in all 4 regions were high adequate that battery-electric vehicles (BEVs) were on the whole cheaper than inner explosion vehicles by a tiny margin.

The TCO for Hybrid Electric Vehicles (HEVs) was still aloft than that of normal vehicles in all regions, since those cars accept fewer subsidies and still need fuel, distinct entirely electric vehicles. Plug-in Hybrid Electric Vehicles (PHEVs) were some-more costly than any kind of automobile in all regions solely Japan, where inexhaustible subsidies bring down the cost significantly.

Falling costs

The researchers advise that the results aren’t indispensably germane to other regions since prices and inner subsidies both change so much. But the results can help other states and countries establish how to cost subsidies or taxation fuel. California and Texas were selected since they have a identical normal income, but California’s prolonged story of ancillary low-emission vehicles creates such cars some-more prevalent there. In Japan, the marketplace share of hybrid vehicles is high, since in the UK low-emissions vehicles are comparatively wanting despite high gas prices (due in partial to the superiority of cost-efficient diesel vehicles).


The study focused on 5 identical automobile models. It enclosed information on the Toyota Prius (an HEV), the Toyota Prius plug-in indication (a PHEV), and the Nissan Leaf Electric indication (a BEV). To review low-emissions costs with inner explosion costs, Toyota Corolla information was used in Japan, California, and Texas; Ford Focus information was used for the UK.

The good news is that, in all 4 of the complicated regions, the TCO for low-emission vehicles fell between the year the automobile was introduced and 2015. Although the researchers cited regenerative braking, stop-start engines, and “a novel delivery system” as factors that boost the production costs for low-emission vehicles, handling costs, reduce fuel costs, and assets on taxes and upkeep all help equivalent these. Generally, the many costly disproportion between an electric or hybrid automobile and an ICE automobile is the cost of the battery, but that cost has been fast falling. Bloomberg New Energy Finance estimated that in 2016 (PDF), electric automobile batteries cost just $273/kWh compared to $1,000/kWh in 2010.

In this study, TCO was distributed using an normal annual mileage for any of the 4 regions—6,213 miles/yr in Japan, 10,400 in the UK, 11,071 in California, and 15,641 miles/yr for Texas. Any arrange of “cost” compared with operation stress was ignored. “With BEV operation surpassing 100 miles, the limited automobile operation does not indispensably poise an issue for the normal daily commuter, therefore it is suitable to assume the same annual mileage for all automobile types,” the researchers wrote.

In addition, they noted, “an normal annual upkeep cost for any automobile form is included. Costs were found to be cheaper for electric vehicles due to reduction wear on the brakes and fewer moving parts. Vehicle indication specific costs were sourced from CAPP automotive consulting.”

Although low-emission vehicles still onslaught to strech loyal cost relation with ICEs, this study shows that taxation incentives and rebates from governments can equivalent that cost. TCO also shifts as gas prices rise, so that ought to cause in to any funding program adopted by a government.

Are automobile buyers wakeful of TCO?

The researchers also tried to relate the TCO of normal hybrid vehicles with their marketplace share. These vehicles have been mainstream for prolonged adequate to see either the TCO can actually change purchasing decisions.

What the researchers found was discerning enough: normal hybrid automobile adoption is stronger when the TCO for variety is reduction than that of required explosion vehicles. People bought some-more variety when supervision subsidies and/or the cost of fuel increasing adequate to dump their TCO next that of ICE cars. The cost of the automobile was some-more closely tied to adoption than to fuel price, solely in Texas, where normal annual mileage was high.

But the researchers also remarkable that TCO for hybrid vehicles varies the many of all the low-emission models they looked at, due to the variability of fuel cost and region-dependent mileage statistics (if you drive a lot more, fuel cost will matter a lot some-more to you). Still, adoption rates correlated to this variability.


The researchers concurred that TCO isn’t the only cause in determining to squeeze a car. Brand loyalty, design, and accessibility of refueling infrastructure all play a big partial in that decision. Since these factors are formidable to lane and eventually finish up being rather subjective, the investigate group didn’t try to cause them in. In addition, societal-level costs of emissions from hoary fuel-burning vehicles also weren’t enclosed in the cost of ICEs.

The highway blocks stopping adoption of low-emission vehicles are partially minute by investigate from progressing this year, when McKinsey Company found that 30 percent of US automobile buyers have deliberate shopping electric cars—but only 3 percent actually bought one. 50 percent of the people the organisation surveyed pronounced they were uncertain of how electric automobile record worked, which is certainly a cause that a rival TCO alone can’t overcome.

The study also says that supervision subsidies shouldn’t last forever. Generally, economists have concluded that once electric automobile batteries hit $100/kWh, they’ll be cost rival with ICEs. “It is peerless that there is a light phase-out of incentives once record has reached cost parity, generally when oil prices are low,” the researchers conclude.

Applied Energy, 2017. DOI: https://doi.org/10.1016/j.apenergy.2017.10.089  (About DOIs).

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