EVs are past the TCO tipping point
EVs are not just greener than ICEs. In many European markets, they now also have a lower TCO. Continued attention to cost is required, though: the tipping point may be passed in most cases and places, but not yet always and everywhere.
Electric vehicles (EVs) are cheaper to power than cars with internal combustion engines (ICEs), but more expensive to acquire – due mainly to the high cost of the battery. However, as battery technology progresses, the Total Cost of Operation (TCO) is dropping fast.
According to a whitepaper released by LeasePlan last year, the tipping point – where EVs are no more expensive than ICEs – has been reached in many European countries. More crucially, it has been surpassed in many use cases, making EVs not just a more responsible choice, but also a cheaper one.
Reaching the tipping point for EV and ICE parity
Developing a total of 456 scenarios across 14 European countries for ICEs and EVs of comparable sizes (i.e. B-segment), with similar service packages and used in essentially the same circumstances, the study concluded that EVs are already well below price parity with ICEs in 56% of all those scenarios.
Using the cost of ICEs as a baseline, EVs overall were especially cheaper in terms of taxes (-88%), fuel (-54%) and maintenance (-23%).
- The tax difference is due to strong government incentives towards EVs.
- Obviously, electricity is much cheaper than petrol or diesel.
- And maintenance is cheaper because EVs have fewer moving parts.
EVs are somewhat more expensive in tyres (+2%) and insurance (+6%). The biggest drawback in terms of cost was depreciation and interest, for which EVs were 17% more expensive than ICEs.
- Due to their higher torque and weight, EVs wear out tyres faster than similar ICEs.
- Insurance relates to catalogue price, which is higher on average for EVs.
- Catalogue price and high battery cost also lead to higher depreciation and interest.
The grand total, however, is that EVs overall are 5% cheaper than similar ICEs.
EVs have a higher price per vehicle, but a lower running cost. Which means the cost advantage plays out optimally in scenarios with more mileage or of longer duration, ideally both. However, even more important than either mileage or duration is vehicle selection.
This article first appeared in Fleet Europe Magazine 127. In full, the article contains more analysis with tables and detail. You can read it in full and download FEU127 here.