- Electric cars are cheaper to own over the long term than gas-powered vehicles.
- But consumers aren’t always guided by cost when they buy a vehicle.
- Thus far, the EV value proposition hasn’t created a big market for the new technology.
Compared to just a decade ago, we have a lot more choices when it comes to buying an electric car.
Short-range EVs such as the Nissan Leaf and the BMW i3 have been around for years, and long-range, mass-market EVs like the Chevy Bolt and Tesla Model S have started to arrive.
Electric vehicles continue to make up a tiny percentage of global sales — only about 1% — but more are on the way, so presumably that datapoint will improve over time. Unfortunately, much of the analysis around EVs’ potential tends to lump all EVs together, ignoring some of the obvious dynamics of the auto market.
On average, running a vehicle on electricity is over 50% more cost-effective that running a car on gas. There’s really no debate about this, and the simple fact was recently backed up in a University of Michigan study by Michael Sivak and Brandon Schoettle.
Another rule of thumb that’s developed around EVs is that although the initial cost to buy a vehicle is higher than what’s needed to purchase a comparable gas-powered car, a crossover point typically occurs at about 50,000 miles. At that juncture, the EV owner has earned back the up-front cost and will see cheaper operational costs for the life of the vehicle.
I should point out that the cost-of-ownership analysis has to be seen as somewhat unpredictable today, mainly because we know how much it costs to maintain a gas-powered car, but we don’t know how much it will ultimately cost to replace batteries on aging EVs.
The luxury market is different
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