Cost Savings Stack Up on Electric Vehicles

12 June 2018

In this fourth and final article evaluating whether electric vehicles are a fad or the future, I conclude they are indeed the future.

I can feel the cold chill of the climate change deniers and petrol heads breathing down my collar as I write.

I love a grunty V8 as much as the next Kiwi. But the words, “Show me the money”, aren’t restricted to a Tom Cruise movie.

Yes, there are issues around the distance range, price and style options of electric vehicles (EVs). Yes, you will require a three-phase electricity supply if you want to charge your EV in less than eight hours. Yes, we may even see the need in the long term for changes to the way we generate and distribute energy nationally.

Yet, despite these reservations, any EMA member looking at replacing their vehicles any time soon would be well advised to run the numbers before succumbing to the team’s demands for yet more heavy metal.

The reality about EVs compared to petrol/diesel vehicles is as follows.

Electric vehicles are cheaper to run

I asked Graham Galliers, a utility analyst at Total Utilities Management Group, to review the fuel costs for my trusty V6 Commodore and compare them to an electric car equivalent.

When he sent me the calculation table (below), I checked the numbers over and over. Surely, he had been smoking the wacky baccy? But no. Sober, sensible Graham had not fallen into the arms of a patchouli-scented, hippy femme fatale and joined the ranks of the planet savers. The numbers added up.

Even allowing for the assumptions we made around fuel tax, distance range and electricity charges, the economic case behind EVs makes sense today and will progressively improve in the years ahead.

The cost comparison for a business use vehicle travelling 15,000 to 60,000 km a year is compelling – based on a price of $2 per litre for petrol, and taking into account an equivalent amount (66.5 cents per litre) for Government fuel taxes, levies and duties.

Beyond 60,000km, the numbers get even better, but you do run into range issues that could make a hybrid option more practical than a fully EV option, in the short to medium term.

Electric vehicles are, of course, way more expensive to buy than the equivalent petrol vehicle. The associated financial calculations require more time and space than I have here. In each case, a lot will depend on the resale value at the end of the term.

I expect electric car prices to fall rapidly as production rises and competitive pressure sets in. At the same time, I expect the residuals for petrol and diesel cars to fall, along with their declining popularity.

NZ relies on fuel imports to drive our economy.

Yet we are the Saudi Arabia of the Pacific when it comes to renewables like hydro, wind and geothermal energy. Our entire balance of payments deficit would evaporate if we switched to our existing renewables for our vehicles.

Oil is the fuel of last century

Petrol-powered vehicles will be as relevant to this century as horse and buggies were to last century: 24 million horses in the US when the first Model T Ford rolled into production
in 1908, reduced to three million by 1960.

China will produce seven million EVs by 2025. Europe, the world’s second largest car producer, will not be far behind.

See you at the charging station.


Read more electric car analysis in the New Zealand/Australia context, or take a look at these electric car reviews.