Article in this weekends Australian.
Electric cars — a value assessment
https://www.theaustralian.com.au/business/wealth/electric-cars-a-value-assessment/news-story/cac666a67347d4018b90efb2545ab529
Electric cars are suddenly an election issue. The Labor Party has advanced an ambitious plan to make 50 per cent of all cars on the road electric in a decade.
But the Coalition has expressed deep scepticism, with Scott Morrison suggesting “it’s not going to tow your trailer, it’s not going to tow your boat”.
In reality, both parties have advanced policies to encourage electric cars.
To make full disclosure here, I’m a financial adviser, an active investor and a long-time car fanatic. I’m only interested in the investment case — the value proposal of electric cars.
How do the figures add up? Do the ongoing savings of an electric vehicle outweigh the higher upfront cost? Does it make sense, not just from a green perspective but from a financial perspective.
Today, the market is buzzing and almost every major car manufacturer has plans to release an electric model. Tesla, the brand that is synonymous with electric cars, has led the push.
David Coleman, a Sydney lawyer who owns a Tesla model S with a 75kWh battery, says: “If I charge the car at home at night using off-peak electricity at a rate of 10c per kilowatt hour, it costs $7.50 to charge the car overnight.”
With a full battery of electrons, Coleman can drive 400km in his Tesla, meaning the energy cost to drive every 100km is $1.88.
Compare this to the average fuel consumption of traditional petrol engine cars of 10.6 litres per 100km. With fuel prices at $1.30 a litre, the fuel cost to drive is more than seven times higher than that of the Tesla at $13.78.
Rudi Engelbrecht, a director of multinational technology company Tau Solutions, who also owns a Tesla model S, says: “Even though charging at home results in a much lower operating cost compared to fuel-powered cars, this cost can be reduced even further by charging the car from publicly available chargers.
“I park in the city and my car charges for those seven to 10 hours that I’m in the office. This keeps the car topped up, meaning I hardly have to charge from home.”
But what about the other costs?
There are obvious issues such as maintenance, insurance and the less obvious ones like battery replacement and depreciation.
A European survey of Tesla drivers found that after 250,000km, the battery still had 90 per cent of battery capacity available. So the battery in an electric car is probably going to last the life of the vehicle, no different to the longevity of a fuel-powered engine.
With depreciation, the first lot of Teslas sold in Australia from 2015 are still selling for about $80,000, compared to a brand new model at $140,000 on road.
That’s a depreciation rate of about 13 per cent a year. Petrol cars drop on average by 19 per cent in their first year and 15 per cent in their second and third years.
It’s surprising, because technology is progressing at a breakneck pace for electric cars, but the secondary market for older electrics is still buoyant.
With regard to maintenance costs, Coleman says: “There’s just a whole heap less moving parts in an electric vehicle compared to a fuel powered car.
“This means there is a lot less wear and servicing is a simple exercise of tyre check, brake fluid check and air-conditioning check.
“No changing oil, fuel filters, spark plugs and so forth. Even brake pad replacements are rare because the regenerative braking system minimises the use and wear on the brakes.”
But how do the numbers look?
RAC WA have looked at the total operating costs of different electric and fuel-powered vehicles over a five-year period assuming 12,000km driven per year.
They found that it is still cheaper to operate a Holden Commodore or Toyota Camry over a five-year period compared to a Tesla or a lower-cost BMW i3.
Although the operating costs are much lower for the electric versus fuel-powered, the sting in the tail comes in the holding costs, namely depreciation and interest.
The depreciation percentage on electric cars may be less than petrol-powered, but given the higher purchase cost, this equates to holding costs that are almost three times higher compared to fuel-powered equivalents over a five-year period.
RAC WA found that when factoring every cost relating to a car, the four-cylinder Toyota Camry came in at an average weekly cost of $194, while the V6 Holden Commodore came in at $236 a week.
The Tesla Model S P75 cost $465 a week and the BMW i3 $287 a week. The Tesla’s high weekly cost was due to almost two-thirds of the cost relating to interest and depreciation.
With the increase in competition in the electric-car market, the latest era of electric cars are becoming cheaper, with vehicles such as the Nissan Leaf and Hyundai Ioniq about $50,000, not to mention the Tesla model 3 that will come well under $100,000.
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