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Are BEVs cheaper to own than ICEs? Reducing your Carbon Footprint with a BEV May Not Save you Money.


In a 2022 survey, over 50% of individuals globally, and nearly half of Canadians, expressed intentions to purchase an electric vehicle [1]. Factors influencing this growing interest include rising gas prices, environmental concerns, and the perceived higher maintenance costs associated with internal combustion engine vehicles (ICEs).  In a previous Lark Article we looked at the Carbon Footprint benefit of driving a Battery Electric Vehicle (BEV) in areas where the power generation is clean and emits low levels of greenhouse gasses (GHG). The emissions benefits in these regions is clear. While heightened interest in BEVs persists, the upfront cost of acquiring a BEV remains a significant obstacle [2]. A substantial portion of Canadians cite upfront cost as the primary deterrent to adopting electric cars [2]. To alleviate this financial barrier, the Canadian federal government offers incentives, including up to $5,000 for zero-emission vehicles, with some provinces providing additional benefits [3]. Given these dynamics, there is an ongoing debate among Canadians about the true total cost of ownership (TCO) of BEVs compared to ICEs.



In this study we conducted a lifetime TCO analysis, extending beyond the conventional focus on the first decade of ownership. The analysis spans 20 years, including purchase price, maintenance expenses, federal government rebates for BEVs, and the Canadian carbon tax on gasoline.  We looked at three BEV vehicle models and their ICE equivalent models across three segments: small car, compact SUV, and pick-up truck. Specifically the models we looked at were the Nissan Versa (ICE) and LEAF (BEV), the Hyundai Kona (ICE) and Kona Electric , and the Ford F150 (ICE) and the F150 Lightning (BEV).



The Analysis


Purchase price (MSRP) data were obtained from Nissan, Hyundai, and Ford Canadian sales websites. We assume that BEVs receive the $5,000 federal government incentive but do not consider any additional provincial incentives. The analysis assumes an annual vehicle mileage of 15,000 km, reflecting the approximate average annual driving distance in Canada [4].


Energy consumption and costs: electricity and fuel


Data on fuel and electricity usage for each vehicle was obtained from the NRCAN 2023 fuel consumption guide [5]. The cost of gasoline per liter was determined using Statistics Canada's data, reflecting the 2023 average prices for gasoline in Canada [6].


For electricity costs, the average cost per kilowatt-hour (kWh) in Canada was used, excluding the Canadian territories due to their significantly higher per capita energy consumption compared to the provinces [7]. As expected, the energy requirements and operational costs for BEVs are lower in comparison to similar models of ICEs.


Annual cost of energy for 3 BEVs and their ICE equivalent models in 2023
Annual cost of energy for 3 BEVs and their ICE equivalent models in 2023

Federal Fuel Charge Rates


The Canadian federal government adds taxes to the price of fuel. These rates include various taxes, and also reflect a carbon pollution price that will increase from $65 per tonne of carbon dioxide equivalent (CO2e) in 2023 to $170 per tonne by 2030. Given the current discussions and ongoing changes in Canadian parliament regarding the Carbon Tax, its future is somewhat uncertain.  We will assume that the Carbon Tax in Canada will continue in its current form and will continue to increase as proposed as of the writing of this article [8]. The rates result in a carbon tax for gasoline of $0.14 in 2023, which increases to $0.37 by 2030.

This study takes these charges into account and assumes that the charges will stay at the 2030 levels for the remainder of the vehicle’s life.



Maintenance Costs


Maintenance costs were estimated using AAA’s 2022 Your Driving Costs analysis [9]. Since there are no engines or regular engine oil changes in BEVs, their maintenance costs are generally expected to be lower than similar ICEs.  In reality the situation may be different as some reports show that BEVs have slightly higher maintenance costs.  For example, the higher BEV vehicle weight may contribute to lower tire lifetimes and since many models of BEVs are relatively new, they are likely experiencing higher than expected repair frequency that will improve as these models become more mature. Overall, the differences in maintenance costs between ICEs and BEVs are expected to be relatively insignificant to our results.  The maintenance costs values in this analysis are roughly $0.05/km for BEVs and roughly $0.06/km for the ICEs.    



Lifetime TCO Analysis


With advancements in vehicle technology, the lifetime average car mileage for ICEs is roughly 322,000 km [10]. This study assumes a total lifespan of 300,000 km for both ICEs and BEVs. With a 15,000 km driving distance per year, this translates to 20 years of useful life. Electric vehicle batteries are rated to last 10-20 years. However, factors such as heat from hot weather, extreme cold conditions, or swift charging times can reduce performance and rapidly degrade battery lifespan [11]. We assume that BEVs receive a one-time battery replacement at the 10-year mark or just after 150,000 km of use.

 



But how much will a BEV Battery Cost in 10 years?


The largest uncertainty in estimating the TOC for a BEV is the cost of battery replacement.  Some estimates have tried to forecast the price of batteries in the future assuming a steady decline in manufacturing costs. For example the International Council on Clean Transportation (ICCT) published their estimates assuming a 7% per year decline in battery costs [12]. These estimates show that the price for batteries in ten years will be around half of what they are today in 2023.  Only time will tell if these estimates hold given the multiple market forces at work.  It is very difficult to predict the impact of increased demand and possibly limited supply of materials and manufacturing capacity.  These market forces could cause a shortage of batteries and in turn higher prices.  As of today, prices for replacement BEV batteries in some cases are close to the price of buying a whole new vehicle; although we do not expect this situation to continue in the long term, trying to predict the future of battery pricing makes comparing the cost of ownership of a BEV to an ICE highly uncertain and difficult to forecast.


The Results - Are BEVs cheaper than ICEs?


The total cost of ownership of the vehicles looked at in this analysis are shown in Figure 1. It's clear that the biggest uncertainty in estimating the cost of ownership is the price of a replacement battery in the future.


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While the results using the ICCT predicted battery prices (orange bars) show a clear financial benefit to buying a BEV, based on current battery pricing (grey bars) it is difficult to say that there will be a financial benefit to buying a BEV over an ICE.. In the case of the Nissan LEAF, the current replacement battery prices are likely more mature and stable given that the LEAF is now in its 12th year of production. The TCO for the LEAF and the Versa are reasonably similar, and if battery prices come down over time then the LEAF maybe cheaper overall. Only time will tell.


Ultimately the financial impact of buying a BEV will depend on the lifetime of the battery and the price to replace the battery. Overall, the costs of owning a BEV and an ICE over 20 years are fairly similar for similar models and there is no clear financial benefit to buying a BEV today.



Final Thoughts


BEV adoption will continue to be driven by government incentives and the drive towards electrification. As BEV demand grows globally, and as supply chains struggle to meet demand, the impact on prices may push BEVs to higher and higher prices. At the same time, increased research in battery technologies may help bring prices down. Only time will tell where these competing forces will ultimately leave us in terms of BEV pricing. A purchase decision today, based on financial considerations, depends on where the buyer thinks the price of a replacement battery will end up. As of the writing of this article in late 2023, there is no financial benefit to purchasing a BEV, despite government rebates on BEVs and carbon taxes on gasoline. ICEs remain price competitive and in some cases cheaper overall than their BEV equivalents.


If we are to make headway in the battle to reduce GHG emissions, our government needs to create logical incentives to drive consumer behaviour. The carbon tax and BEV incentives need to be re-thought and implemented if we are serious about reducing emissions.



References













Contributors


Researchers

Chukwudi Amadi, Ph.d.

Mauro Aiello, Ph.D.


Authors

Mauro Aiello, Ph.D.

Chukwudi Amadi, Ph.D.


Lark Scientific Financial Support

Axel Doerwald


Graphics

Adri Poggetti







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