Evaluating The Cost of Ownership–Electric v Gasoline Cars.

The New York Times posts an essay titled “The Electric Car, Unplugged” by John Broder, 25 March 2012.  The Hockey Schtick summarized the NYT article this way:

An article in tomorrow’s New York Times proclaims, “The state of the electric car is dismal, the victim of hyped expectations, technological flops, high costs and a hostile political climate.” In typical NYT fashion, the article concludes with the implication that the failure of electric cars is the fault of the fossil-fuel industry.

Because The Hockey Schtick said it so well, you don’t need to read the NYT article, but if you choose to, click here.

I imagine it is hard for some people to put themselves in the shoes of the car buyer.  Most of us are confined within certain boundaries such as amount of money that can be spent on an automobile and what we need to be able to do with that auto.  Gas prices enter the picture but they are not the sole consideration.

My belief is that the people most hurt by higher gasoline prices are typically those having to drive a lot of miles.  Now, while that doesn’t seem like a particularly profound insight, it probably is better than assuming that a person driving a lot of miles would be disposed to buying an EV or a hybrid.  EVs are really not for the high mileage drivers.  The hybrid might seem to be competitive but it’s advantage goes away after just a few miles.

The DOE has a program for comparing different makes and models of cars to determine the cost of ownership.  Using the DOE calculator, the Chevy Cruze is a better buy than the Volt. The DOE program considers operating cost plus initial investment, expected depreciation and cost of maintenance at today’s prices.   The Volt does beat the Cruze when calculating only the cost of fuel.  The DOE uses a 2011 purchase price for the Volt at $40,280 and the Cruze at $18,125.  To use the DOE program to make your own comparisons, click here.

Now some examples: Imputing $4 per gallon gasoline, and 30,000 annual miles into the DOE program, the Honda Fit gives better cost of ownership than the Prius until the 11the year of ownership.  Hardly any autos are still around at the 300,000 miles so data after ten years seems to be of little value.  The Fit cost of ownership advantage gets better at less than 30.000 miles per year.

So where does that leave the EVs and the hybrids?   Seems to me that those go to the people that have a lot of money.  Most of them don’t really worry too much about the price of gasoline anyway.  If you only drive 10 miles to work and 10 back each day, the EV will serve you nicely but the cost of ownership would be very high due to the initial cost and very little to do with the price of gasoline.  If you use the DOE program to compare the Fit versus the Leaf at 20 mile daily commute and 7000 annual miles total with gasoline at $4 per gallon, the Fit is much lower cost of ownership than the Leaf according to the DOE program.

Another factor that is not necessarily rational but has been experienced often in the last 30 years is that gasoline price peaks and then retreats.  New lows may exceed previous lows but at the lower price, the Honda Fit, for example reaffirms the decision to avoid the costly EVs and hybrids.

The reason that EVs and hybrids are not setting sales records is not some nefarious BIG OIL plot, but rather it is rational decision making on the part of the buyer.

cbdakota