New research from UK-based Direct Line car insurance has found that the lifetime cost of an electric powered car is cheaper than a comparable petrol model, with EV owners saving on average more than £100 a year.
That may not sound like a lot, but the general view of EVs is that the higher upfront cost is so great that no matter what the savings on fuel and running costs, it would never end up cheaper over the long run. The new survey finds that is no longer true.
Direct Line’s analysis was based on EVs and petrol models in the UK and is therefore not entirely transferrable everywhere. Nevertheless, the findings are instructive and highlight the changing nature of the competition between EV and ICE model vehicles.
The analysis focused on comparing five 2020 models of electric and petrol vehicles during May, looking at average annual costs by comparing the purchase cost, refuelling cost per relative miles per fuel unit based on an average annual mileage of 7,900 miles (12,713 kilometres), road tax, MOTs, and servicing and insurance costs based on internal Direct Line policy estimates.
In UK money, purchasing a new EV in 2020 and running it over its lifetime would cost £52,133, as compared to £53,625 for an equivalent petrol fuelled model. If we were to convert that directly into Australian dollars, it would work out to be around $A92,695 for an electric vehicle and $A95,324.
While the initial outlay for an EV is certainly higher – and, in the UK, even taking into account for government grants, an EV is around £5,000 more expensive than a traditional petrol model – running an EV is “significantly cheaper” according to Direct Line.
It says that the annual running costs average out to be around £1,742 ($A3,096), or £33.50 ($A59.55) per week for an electric car, which is 21% cheaper than the running costs of a comparable petrol fuelled car at £2,205 ($A3,919) per year or £42.40 ($A75.37) per week.
“It is an exciting time for electric vehicles, with a record number of these licenced cars on Britain’s roads last year,” said Neil Ingram, head of motor product at Direct Line.
“Our analysis also shows that with the ban on new non-electric cars set to come into force in less than 15 years’ time, Britons could already be saving money by switching from a traditional petrol or diesel car to an equivalent electric model.
“We expect prices to come down in future, thanks partly to the Government’s commitment to making greener vehicles more accessible but also to advances in technology ensuring that purchasing, refuelling, maintaining and insuring an electric car becomes easier, cheaper and better for the environment.”
The nature of transitioning to an EV in the UK holds with it a raft of extra factors to consider. If a new car was bought today, and it ran for an anticipated 13.9 years, a new car would be needed by the end of 2034, just ahead of the introduction of the UK’s ban on petrol, diesel, and hybrid cars in 2035.
Moreover, Direct Line’s research also found that EVs hold their value much better than their petrol equivalents, with a second-hand, year-old EV only losing 12% of its value compared to 24% for petrol models.
Car buyers in the UK also benefit from a range of grants which have been created to encourage people to switch to greener modes of transport, including subsidies on home charging ports with the Electric Vehicle Homecharge Scheme (EVHS) contributing £350 to the cost of installation.
An additional saving of £300 could be made by having the installation carried out by an Energy Saving Trust-approved engineer.
Incentives also exist allowing a customer to save up to £3,000 off the cost of a new electric vehicle thanks to the Plug-in Car Grant (PICG). In June, there was also a suggestion that the UK Government may re-launch a scrappage scheme that would see motorists save as much as £6,000 on the price of a new electric car if they were to scrap their existing petrol or diesel model.
“Electrification is growing in popularity and availability, backed by Government incentives, especially for fleet buyers who benefit from 0% electric vehicle company car tax,” explained Anca Young, insight and intelligence manager, Thatcham Research, whose comment was provided by Direct Line.
“The driving range and charging infrastructure has also improved dramatically in the last few years and will continue to do so. As demand for EVs increases, there is a corresponding reduction in production costs per unit, which encourages further take up.
“Although the cost of Lithium-ion batteries used in EVs is reducing, they remain more expensive than conventional internal combustion engine (ICE) powertrains and are therefore generally more expensive to purchase.
“There’s movement towards greater collaboration between vehicle manufacturers with a view to reducing the cost of EV development and production. The general construction of EVs differs from traditional cars and typically materials, parts and repairs are, more complex and costly. This makes the overall insurable risk less competitive than many traditional, ICE options.
“Manufacturer EV platform collaborations are becoming more popular, e.g. where one manufacturer makes the platform (or ‘skateboard’) and others share it with unique bodies (or ‘top-hats’).
Notable collaborations include Volkswagen and Ford, General Motors and Honda and Toyota with Subaru. The accessibility and availability of charging points is also increasing public confidence, as are the warranties that guarantee battery performance over the lifespan of the vehicle.”