For most consumers, the EV math isn’t working yet
Without raising the gas tax, EV goals could be hard to reach.
Welcome back, readers! I’ve been looking at data on electric vehicles (EVs) and hybrids for the past few months and it’s time to share my takeaways before analysis paralysis squashes this idea for good. It’s easy to get bogged down in the data and it all started when I found myself in the market for a new car earlier this year. I came away from the experience with the (disappointing) realization that EVs aren’t the magical two-fer (good for the environment AND the wallet) I thought they were. At least not yet.
In this newsletter, I’ll explain the math and different factors at play. In the following one, I’ll address how state policy can address this.
EV bang-for-the-buck depends on where you live
The last few times I’ve visited family in California, I’ve noticed the increasing share of EVs out on the road. My son and I even modified the old “Punch Bug” car trip game to count Teslas. (And also, no punching.) To some degree, we expect this of California—a place where lots of people can afford to be early adopters and pay more to do the environment a solid.
But over the past two years, I’ve also noticed an uptick in EVs in my neck of the woods. New charging stations have also been installed in town. I figured if EVs are catching in farm county, then that affordability hurdle (thanks to tax credits) must be getting lower.
And then I went car shopping.
Granted, I’m probably not like a lot of consumers and before I stepped foot on a car lot I went online to run the numbers. What I discovered is that the full $7,500 federal tax credit for EVs only applies to a handful of cars. Darn. Another very small handful are eligible for the $3,500 credit. Double darn.
None of these cars, by the way, are the cheapest EV options. So, compared with traditional cars and even hybrids, I’m still shelling out a lot more even after the tax credit.
*Disclaimer: The charts and data in this newsletter, while fact-checked and sourced, do not necessarily represent an “apples-to-apples” comparison of vehicle specs. The main factor was best MPG for the sticker price.
But surely, the fuel and maintenance cost savings will make up for it! Wrong. Or, rather, it depends on where you live. Looking at states with low, average, and high cost-of-living:
Gas prices and electric utility rates vary wildly across the country. Recharging an EV at home ranges approximately between $6 and $15 each time and the per-mile savings is lower in cheaper states.
If you drive less than 12,000 miles annually, you may never realize your cost savings before getting a new vehicle.
Hybrid vehicles are less out-of-pocket but still take years to realize savings.
Factoring in only at-home charging costs for EVs (which is cheaper than on-the-road), it takes a long time to make up for that upfront cost. And let’s face it, this is probably a best-case scenario because there will be lots of times drivers recharge on the road and pay more.
What I didn’t include and why
State sales tax credits for EVs and the cost of installing charging equipment, which vary by state.
Maintenance. The expected maintenance costs for EVs over a decade are lower than for traditional cars, but the data I found on EV and hybrid costs were inconsistent.
Except in places where electricity costs are low and gas prices are moderate-to-higher, consumers can start realizing their cost savings sooner with a hybrid vehicle compared with an EV. But it still takes years to start realizing those savings and a lot can change in the meantime.
When it comes to light-duty vehicles, EVs are a clear choice over hybrids. It still takes at least a decade to start realizing savings compared with a gas-guzzler, but truck ownership tends to be longer than for cars. Moreover, the MPG difference between a hybrid truck and a traditional one isn’t that impressive for the price differential.
You can probably guess where I landed. For my particular driving habits and for where I live, getting an EV will cost me more in the medium-to-long-term. Even a hybrid car takes years to realize overall savings. But lowering our carbon footprint is a factor for us, so that’s what I ultimately chose.
Turning to the EV mandate landscape
So why am I detailing all of this in a public money newsletter? Because I realized the following two things after my car buying experience.
One: With ever-improving fuel efficiency today, the upfront cost of buying an EV might not save consumers over the long run—even with federal and state tax credits.
Not everyone will create spreadsheets and over-analyze the possibilities like I did. But there are plenty of “true cost to own” online calculators out there that can quickly give consumers their rough bottom line.
For example, here’s what I found from AAA’s calculator for a Tesla vs Hyundai in California:
Two: Big picture, gas and electricity prices are everything. And that is where state and local government policy can play a role.
In my next newsletter, I’ll look at what some governments are doing in this area and whether EV mandates should take this data into account.
All good points. Then factor in the inevitable state-level attempts to tax EV use as an offset to lost gasoline tax revenue. And the costs to be borne by everyone, no matter what or whether they drive, if and when the electric grid struggle with snowballing strain of EV charging at scale. (I believe California has already urged EV owners not to charge during peak usage periods, which rather degrades EVs' commuting utility.)
Personal EVs are great choices for affluent suburbanites that can rig up at-home chargers, own a second mild-hybrid or pure ICE vehicle for roadtrips, and are motivated by moral / sustainability preoccupations as much or more than cost savings. For city-dwellers, roadtrippers, or people on budgets, the EV road hasn't risen to meet us yet.
It's far smarter and more productive to roll out EV tech at scale through captive fleets that perform defined missions, like city transit buses and urban delivery vans. Tesla or no Tesla, I think personal transportation will be the last domino to fall here -- by which I mean, penetration crosses 50% of households.
Great article, Liz! The high upfront cost of EVs and the lack of charging infrastructure are significant hurdles for many consumers. While incentives help, they aren’t always enough to make the math work out. Looking forward to seeing how advancements in technology and infrastructure can help bridge this gap. Thanks for the insightful analysis!