Will the Electric Car Survive?

minijack 300x197Will the electric car be able to survive its latest threat?

The biggest news in the auto industry in the last few years has been the hype around electric cars. There’s the Tesla Roadster, Chevy Volt, the electric MINI and small utility vehicles like the ZAP Electric Cars and the Think City. There are several reasons for this: they’re environmentally friendly, they can help gain energy independence, but the biggest reason has been gas prices. When gas prices are almost $5 per gallon, the high upfront cost for an electric vehicle makes sense, but yesterday I paid $1.75; that’s $20 for a full tank of gas, not the $50 that I was paying over the summer.

Of course, we really want to know if electric cars can save us money. So I thought I’d look at 3 of the most popular up and coming electric cars to see how much money they save over an equivalent gas car. I’m going to compare the cost for running them for a year (assuming 12,000 miles per year) against gasoline powered cars of a similar type.

volt2 300x188Chevy Volt

Some might argue that the Volt is a hybrid, while technically that might be true, it would be more accurate to describe it as an electric car with a gas generator. The car can run for up to 40 miles on a charge before the generator comes on, which means most people will be able to do all their daily driving without using the generator. Then when they return home, they can plug the car in so that it’s waiting with a full charge the next morning. This combines the energy savings of electric cars with the range of gas powered cars. Once past the initial 40 miles, the generator is said to get around 50 mpg. For the calculations below I’m assuming that all driving is done on battery power.

The Volt has a 16 kWh lithium Ion battery pack. When the Volt is plugged in, it will charge the battery to approximately 85%. The generator will kick in when the battery drops to below 25% using about 9.6 kWh in the process. This means that the Volt will use about 2880 kWh/Year with the average cost of electricity in the US at 11 cents/kWh that comes out to about $316/year. I live in Maryland where the average cost of electricity is 7.73 cents/kWh so that would come out to about $222/year, in California the average cost is 12 cents/kWh so it would be about $345/year, and you Hawaiians get to pay about $480/year because electricity is 16.73 cents/kWh there.

I did similar calculations for gas guzzlers as well. I’d guess that a similar sized sedan would get around 25 mpg, so at $4/gallon, a 25 mpg car will cost around $1,920/year, and at $1.75 it would cost around $840/year. So at $4/gallon you save between $1440 and $1700 dollars per year, but at $1.75 you’d only save between $360 and $620 per year. That’s still a decent savings, but it’s not nearly as much. Let’s see if that will translate to savings with the cost of the car included.

Originally GM wanted to charge around $30,000 for the car, but realistically it will cost closer to $40,000 (it’s going to cost GM $750 million by the time development is completed), then subtract a $7,500 tax credit and the ending price will be about $32,500. That’s not nearly as much as I had expected before looking into this. Now we’ll look at comparable cars. Chevy has the Malibu and the Impala and there’s only a $2,000 price difference between the two so I’ll go with the cheaper one and that’s the Malibu for $22,275. I’ll also throw in 2 other cars for good measure, the Toyota Camry starts at $19,145 and the BMW 328i starts at $33,200.

So, starting with the BMW, at this point you’re already ahead so you can just soak up the savings, of course right now BMW’s offering 0.9% financing so it might not be that simple. The Malibu and the Camry are a little more difficult because there’s a $10,000 and $13,000 difference respectively. At $4/gallon, it would take about 6 to 8 years to cover the price difference, and with a $1.75/gallon price it would take between 19 to 25 years to make up the difference. I was also assuming the average cost of electricity for those numbers, so those numbers could change. Of course, the Malibu and Camry listed here are the base model so any upgrades would change this substantially.

Below is a table showing the cost of running the Chevy Volt for a year vs. running a 25 mpg sedan for a year at $4 and $1.75 per gallon.

The cost of running the Chevy Volt for a year (12,000 miles).
  Avg MD CA HI
Chevy Volt $316 $222 $345 $480
The cost of running a 25 mpg car for a year (12,000 miles).
  $4/gallon $1.75/gallon    
Sedan 25 mpg $1,900 $840    

The following table shows how many years it will take to see a return on investment (ROI) for the Chevy Volt when it is purchased instead of the cars listed above.

Vs. ROI $4/gallon ROI $1.75/gallon
BMW 328i 0 years 0 years
Toyota Camry 8 years 25 years
Chevy Malibu 6 years 19 years

mini 300x223Mini E

The Mini E will be available to 500 people in California, New Jersey and New York with a 1 year lease. The Mini E will have a 150 mile range, and will not have a generator like the Volt.

The Mini E has a 28 kWh lithium Ion battery pack. This means the Mini E will use about 2240 kWh/year with the average cost of electricity in the US of 11 cents/kWh that comes out to about $245/year. In Maryland it comes out to about $175/year, CA is around $270/year and HI is around $375/year.

I have a 2002 Mini Cooper and I get around 28 mpg city and 33 mpg highway (the new Minis are a bit more fuel efficient), so I’ll compare the Mini E to the cost of gas for a 30 mpg car. When gas was $4/gallon it would cost about $1,600/year at 30 mpg ($1450 at 33 mpg), but at $1.75/gallon it would cost around $700/year ($635 at 33 mpg). Now, lets see if that translates into savings.

The main problem with the Mini E right now is the lease price, which is $850 a month. Keep in mind that the Mini E is only available through a limited time and limited availability trial. If you look at the lowest cost Mini Cooper, their shortest lease is 24 months. With a 24 month lease, and a 12,000 annual mile limit, the lease will cost $194/month according to Mini’s payment estimator. Even when I switched to the Cooper S and added all the packages the lease was only $327/month. My monthly payment for a 5 year loan at 5% was around $350/month.

So comparing the electric Mini to the leased Mini the price difference starts out at $656/month. Even with gas at $4 per gallon and using the lowest priced electricity that I’ve looked at in this article, the most you’ll save per month using electricity instead of gas is $119/month. Which means that you’d be paying $537 more per month for a Mini E than a leased Mini Cooper, and you’d pay about $380 more per month for the Mini E than for a Mini Cooper with a traditional 5 year loan. So, it looks like the Mini E won’t be saving anyone money. It looks like getting a Mini E will be more about status or environmental friendliness than about fiscal responsibility.

Below is a table showing the cost of running the Mini E for a year vs. running a 30 mpg Mini Cooper for a year at $4 and $1.75 per gallon.

The cost of running the Mini E for a year (12,000 miles).
  Avg MD CA HI
Mini E $245 $175 $270 $375
The cost of running the Mini Cooper for a year (12,000 miles).
  $4/gallon $1.75/gallon    
Mini Cooper $1,600 $700    

Calculating ROI for the Mini E doesn’t really make sense, the lease is only for one year and the lease price is so high that the price of gas would have to go up to $9 per gallon to make up the difference between the lease price of a Mini E and a leased Mini Cooper.

tesla 300x249

Tesla Roadster

With a price tag of $109,000 the Tesla Roadster isn’t being made for the budget conscience consumer. It’s a sports car first and foremost. Tesla’s using an electric motor to take advantage of the torque. The electric motor allows the roadster to jump off the line faster than nearly all gas powered cars. Even though the Tesla isn’t about saving money, lets look at how much electricity this car uses anyway.

The roadster is using a 56 kWh lithium ion battery with a 250 mile range. The Tesla would use 2688 kWh of electricity in a year provided you actually drove this car 12,000 miles in a year. This would cost about $300/year with the average 11 cents/kWh in the US. It would be around $207 in MD, $325 in CA and $450 in HI.

Considering the cars the Tesla Roadster is up against, I’d say that their mileage would be around 10 (Lamborghini Murcielago) to 20 (Porsche Boxster) mpg, which translates to around $2,400 to $4,800 per year at $4 per gallon, and $1,050 to $2,100 per year at $1.75. That is quite a bit of savings on fuel, but I’m not going to get into total savings considering the wildly divergent prices on this type of car.

Below is a table showing the cost of running the Tesla Roadster for a year vs. running a 10 mpg Lamborghini and a 20 mpg Porsche for a year at $4 and $1.75 per gallon.

The cost of running the Tesla Roadster for a year (12,000 miles).
  Avg MD CA HI
Tesla Roadster $300 $207 $325 $450
The cost of running a 10 and 20 mpg car for a year (12,000 miles).
  $4/gallon $1.75/gallon    
Porsche 20 mpg $2,100 $1,050    
Lamborghini 10 mpg $4,800 $2,400    

The high price of the Tesla and the divergent prices of the cars in this vehicles class makes calculating ROI for the Tesla all but impossible.

The Tesla is fast and it looks cool, but it recently got beat by the boxy little Tango EV. Check it out:

Conclusions

So, it looks like the only way any these electric cars are going to save you any money in the short term, would be when switching from a higher priced (>$30,000) sedan to a Chevy Volt. The Mini E’s high lease price will make it more of a status symbol for those who can afford it. Hopefully, once this limited trial completes, Mini will offer a more reasonably priced option, which seems likely because BMW plans to use the Mini E as a platform for future electric cars. The Tesla’s incredibly high price tag will never be offset by its low fuel cost, but I don’t think it’s meant to be. Hopefully these low gas prices won’t stifle demand for electric vehicles too much, because if the major auto makers stop moving forward with them now, it might take them quite a while to get back to this point when the gas price go back up, and I don’t doubt that they’ll go back up.

I also have not taken into account maintenance costs. Maintenance costs should be relatively low compared to conventional automobiles (at least once electric cars become more prevalent). Electric motors are much simpler than internal combustion engines, even the Volt would require less maintenance than a typical auto because the internal combustion engine is a simple generator. It doesn’t have to deal with driving the wheels, air conditioners, and any number of other things that can cause stress and wear on a typical car’s engine. Of course, there is one exception to these lower maintenance costs, and that’s the battery. The battery is one of the most (if not the most) expensive components in these electric car. An out of warranty failed battery will cost several thousand dollars to replace.

There are many more electric vehicles coming out soon or out now. Most of them are small sub 25 mpg utility vehicles, meant for moving equipment around small areas such as farms or warehouses, or for moving around city streets.

One question is why did the gas prices just drop off the map? Of course there’s the whole supply and demand thing, but I don’t think that can account for such a large drop. People might be driving a little less to save a bit, but our lives center around driving so the cuts can’t be too dramatic. Perhaps one of the oil companies thought to make a quick buck and lower prices so everyone else had to follow suite, but I don’t know if that would cause such a huge drop either? Could the oil companies be worried about losing their revenue stream to electric cars and hybrids, so they’re lowering prices temporarily to sabotage them? I don’t know, probably not, but it could be a nice little conspiracy theory.