Last Thursday I was listening to the news on the radio. One of the items was about how the current fuel prices could influence electric vehicle sales negatively. Oil prices haven’t been this low (at the moment of writing $57.81 per barrel of crude oil) since 2009. This is something that fuel car owners are starting to notice at the gas station. Maarten Steinbuch, automotive professor at the TU Eindhoven, reckons in the news item that when these prices will remain low for a couple more months, less and less people will be buying electric vehicles. From a sustainable point of view this is a concerning tendency. I therefore decided to do a quick back-of-the-envelope calculation (which I quickly transferred to an Excel sheet) on the break-even time between an electric vehicle and a fuel vehicle.
One electric vehicle that immediately came to mind was the Nissan Leaf. I decided to compare the Leaf with two other Nissan vehicles that are more or less comparable in size; the Note and the Micra. I gathered data on the price, the annual tax, annual insurance and costs of use of these vehicles. I picked the cheapest available option for every car, which turned out to be the Visia editions of these cars. When I started looking for annual taxes, I stumbled upon my first problem. The tax for cars that don’t emit any CO2 are set to zero until January 2016, but are still unknown for the time after. I decided to assume that taxes will probably still be rather low compared to fuel vehicles and neglected them for now. I used the website independer.nl (which claims to be an independent insurance comparison tool) to calculate the lowest possible annual insurance. Please note that the insurance cost for the Leaf is much higher because the price of the car is higher. To determine the annual distance I asked some people around me that own a car how many kilometers they drive per year and settled down for 12,000 km per year. Although the fuel price is somewhere around €1,55 per liter right now, I used €1,70 to represent the fuel prices over the last 5 years. Since electric vehicles are only 100% sustainable in use when they are charged with electricity from renewable sources I used the price per kWh I pay to my electricity provider Greenchoice, which is (averaged between day and night rate) €0,22665 per kWh. The information on the range of the Nissan Leaf varies depending on wether conditions and driving style. I eventually picked 160km since all values are around this number. All data on the cars are either from the Nissan website or autoweek.nl.
Using these numbers I calculated the annual total cost of using the car. I added this to the price of the car to create the cumulative total cost for year 1, and continued adding the annual costs for year 2, 3, 4, etc. I was shocked to find out that a Nissan Leaf, according to these calculations, will only be cheaper than a Nissan Note after 18 years. I continued these calculations up to 25 years, but the cumulative total of the Leaf comes nowhere near the Micra. Of course, almost nobody uses the same car for 18 years nowadays, so there are some side notes to this timeframe, even as the missing additional costs like maintenance or changing characteristics of the car. I edited my calculations and raised the annual distance to 20,000km. In this scenario the Leaf becomes cheaper than the Note after 12 years. The Micra will remain cheaper for 18 years.
This back-of-the-envelop calculation didn’t turn out as a fair calculation. It is filled with assumptions that may differ over such a long timeframe like residual value, tax, electricity price, gas price, maintenance, etc. You could easily argue that someone that is in the market for a car of this size might not be willing to pay the €31,010 a Nissan Leaf costs, but on the other hand, someone with such a budget might also be looking for something more luxurious or larger. It is however the kind of calculation that a consumer that is in doubt of buying a electric vehicle might do. Nissan therefore makes a comparison between a (rather small) Leaf and a (quite large) Qashqai.
My main point in this discussion is that the initial investment to buy an electric vehicle is simply still too large for the majority of the consumers. In my first column I referred to the circular economy and pointed out that modes of ownership might change in the near future. Especially in the case of these electric vehicles, leasing would be a better option for most consumers because they don’t have to make the initial investment and they will start benefitting from the lower user costs of the electric vehicle right away. Another option, which is considered in our report on sustainable mobility on Texel, is car sharing. People use cars from rental companies and pay per kilometer. This idea, with electric vehicles, has already been launched on Terschelling and is called Schylge e-auto. Nissan is now selling the Leaf at a reduced price by offering consumers the possibility to lease the car batteries. I couldn’t introduce this in my calculations because the price is based on a 3 year contract and I’m not sure how Nissan will change the lease price after three years. For the initial three years it was not cheaper however.
I draw a few careful conclusions from the mini research I did. It is not that easy to compare electric vehicles to fuel vehicles. A lot of future data is unknown, or difficult to predict. It depends on many factors like technological development and political climate but also on (network) externalities like infrastructural changes, for instance the availability of charging poles. I also think that electrical vehicles are not competing against other cars in their size, but to larger (more expensive) cars. If manufacturers really want to compete in that size class, they probably need to lower the prices. Finally, I really think that these cars are the future. But they also require the economy of the future.