From a purely economic perspective (ignoring aspects like range anxiety or debatable environmental impact), do Electric Vehicles (EVs) make sense?
How much does one need to drive, how expensive does gas need to be, and / or how cheap does electricity need to be for the numbers ($) to make sense?
What if one starts with a fuel-inefficient Internal Combustion Engine [ICE] gas-powered car (e.g., < 20 Miles Per Gallon [MPG]) as the baseline? Does this tilt the numbers in favor of EVs?
What if one buys a highly battery-efficient electric vehicle (e.g., > 140 MPGe, or equivalently < 24.1 kWh used per 100 miles)?
Glad you asked….
Let’s do a deep dive!
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First, let’s start with quantifying how much it costs in “gas money” to own an ICE vehicle, as a function of fuel efficiency (MPG) and number of miles driven.
For reference, the cost of gasoline in the U.S. varies from a low of ~$3.10/gallon in Mississippi to around $5.50/gallon in large parts of California. For the week of 22 Apr 2024, the average price of gas in the U.S. was $3.79/gallon.
In Charles Town, WV (where I live) the average price of gasoline is about $3.53/gallon, as of April 2024. This is about 20 cents cheaper per gallon compared to both Baltimore (MD) and nearby Loudoun County (VA).
Keeping Charles Town cost of gasoline as a baseline, how much is the monthly cost for ICE driving?
My current ICE vehicle only gets about 20 MPG and I drive around 25,000 miles per year. This equates to ~$360/month spent on gas (see the point at [20, 25] above in green). If my car were to be 57 MPG instead (e.g., Toyota Prius), this would bring down my monthly gas costs to around $130/month.
If I drove a Ford Excursion that got around 10 MPG (6.8L V10) and drove 15,000 miles per year, this equates to ~$440/month. If one drove 35,000 miles in a 10 MPG vehicle, they would be spending around $1030/month in gas in Charles Town, WV!!
(According to the U.S. Department of Transportation, Americans drive on average 13,476 miles per year, or 36.92 miles per day.)
If one lived in Los Angeles, CA, where gas is ~$5.38/gallon (March 2024), the monthly gas costs above from WV would all increase by about 52.4%. E.g., my monthly gas costs would climb from around $360/month to around $550/month.
Conversely, if one lived in places with super cheap gasoline like ~$3.10/gallon in Mississippi, the monthly gas costs above from WV would all decrease by about 12.3%.
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Second, let’s now understand how much it costs to operate an electric vehicle, as a function of both power / battery efficiency (MPGe, or equivalent kilowatt-hours used per mile driven) and cost of electricity ($ / kWh).
For reference, the state with the lowest electricity rate in the U.S. is Nebraska, which averages about 9.85 cents per kilowatt-hour, or $0.0985/kWh (as of January 2024).
The state with the highest electricity rate in the U.S. is Hawaii, which averages about 44.28 cents per kilowatt-hour, or $0.4428/kWh (as of January 2024).
Electricity in Charles Town, WV is $0.1213/kWh (Potomac Edison provider).
In Baltimore, MD it is ~$0.17/kWh.
In Bismarck, ND it is $0.0828/kWh (cheap).
And in Los Angeles, CA it is $0.291/kWh (expensive).
Let’s also briefly discuss EV efficiencies, which are typically expressed either in MPGe [higher is better], or kWh used per 100 miles [lower is better]. Given MPGe (e.g., 110), one can find the equivalent kWh/100 miles by dividing 3370 by the MPGe. E.g., 110 MPGe = 30.63 kWh/100 miles. Conversely, given kWh/100 miles, one can find MPGe by dividing 3370 by the kWh/100 mile value. E.g., 25 kWh / 100 miles = 134.8 MPGe.
So how many dollars per month does it take to operate different EVs, as we vary both efficiency and driving mileage? Keeping the 12.13 cents per kilowatt-hour cost of electricity in Charles Town WV, let’s take a look:
We can see from above that even while driving 35,000 miles per year with a pretty inefficient 45 kW/hr EV (like heavy electric pickups like the Rivian R1T), in a place with relatively cheap electricity like Charles Town, the “electricity costs of driving” only amount to ~$160/month.
But what if we live in a place with more expensive electricity (like Hawaii or California)?
Let’s take the relatively efficient Tesla Model 3 (the 2nd most popular EV in the U.S. right now), which only uses up 25.3 kWh/100 miles as a baseline and look at how much the monthly electricity costs are:
We can see from above that driving 30,000 miles per year in a Tesla Model 3, in a state with cheap electricity like North Dakota or West Virginia amounts to ~$65-80/month in electricity costs. In Michigan, this increases to about $110/month. In Alaska, $150/month. In Massachusetts, $175/month. In California, $190/month. And in Hawaii, the state with the most expensive electricity, $280/month.
Below is the same curve but with a more inefficient EV, like the Rivian R1T. The Rivian R1T monthly electricity costs are all ~67% higher than driving the Tesla Model 3 Long Range model, regardless of how much you drive and what the local electricity-rate providers charge.
So now let’s put the costs of operating an ICE vehicle (gas) against those with an electric vehicle and see what the cost differences are…using Charles Town, WV as the baseline for electricity costs (12.13 cents per kilowatt-hour), how much do we save if we drove an EV instead of a gas car, as a function of miles driven and MPG of the gas-powered car?
Let’s take a look:
From above, we can see that if one drove 15,000 miles per year in an “average” car that gets 25 MPG, one would save ~$140/month driving a Tesla Model 3 LR instead. If one drove 30,000 miles in a SUV that only got 10 MPG and instead drove the Tesla, they would be saving $780/month!
But if one is driving a fuel-efficient ICE vehicle like a Toyota Prius getting 55 MPG, driving 30,000 miles per year, a Tesla would only save them $85/month.
Driving 25,000 miles in a 20 MPG ICE would make driving a Tesla instead save oneself ~$305/month.
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Finally, let’s take a look at the amount of time it would take to recoup the "premium” that car manufacturers tend to charge for a new EV over their rough ICE-equivalent.
For the 2024 Mini Cooper Hardtop 2 Door, the electric model starts at $30,900, while the gas (ICE) model starts at $25,800. This is a $5100 “premium”. The gas Mini Cooper gets about 32 MPG combined, while the electric gets 110 MPGe. So how long does it take to recoup the EV premium if one drove 25,000 miles per year?
In Charles Town WV where gas is about $3.50/gal and electricity 12 cents/kWh, the amount of time it would take to recoup the $5100 EV premium is about 2.5 years. In Los Angeles CA where gas is about $5.38/gal and electricity 29 cents/kWh, it would take 2.24 years. In a place with electricity costs of 20 cents/kWh but cheap gas of $3.10/gal, it would take 4.77 years. And we can see above in the dark blue region that in places with very expensive electricity and very cheap gas, operating an EV does not make sense from an economic perspective, as it is effectively cheaper to drive a gas-powered car.
Let’s do one more example. The 2024 Subaru Solterra EV starts at $44,995 while the rough size-equivalent, but gas-powered Subaru Forester starts at only $27,095. This is an over $17,000 “EV premium”. So what is the payoff timeline for buying a Solterra over a Forester? If one drove “a lot”, at 25000 miles per year, this is the curve below [the Solterra gets about 104 MPGe, while the Forester gets 29 MPG combined]:
We can see that even while driving 25,000 miles per year, the time to recoup the large EV premium of the Solterra over the Forester is quite long. In Charles Town WV, it would take ~8.96 years to recoup the difference in purchase costs! In a place that charges 30 cents/kWh and $4.50/gallon, it would take 12.2 years. In a place that charges 26.7 cents/kWh and $3.60/gallon, it would take 18.9 years!
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In conclusion, the tradeoff in buying and operating an electric vehicle (EV) versus a gas (ICE) vehicle all depend on the costs of gas, electricity, driving habits, and efficiency (MPG and MPGe) of the vehicles in consideration.
If one buys an efficient EV (e.g., Tesla Model 3, Hyundai Ioniq 6), lives in a place with cheap electricity (e.g., Southeast or using solar panels) and / or expensive gas, drives a lot (e.g., over 20,000 miles per year), and is coming from an alternative / status quo of a relatively inefficient gas car (e.g., getting less then 20 MPG), then going electric makes a lot of sense — potentially saving many hundreds of dollars every month.