The Bottom Line of Electric Cars

“Total cost of ownership” includes all costs that accrue from initial purchase to resale, including depreciation, fuel costs, taxes, insurance, and repair and maintenance. A median gasoline model with a standard feature set in the medium size vehicle class (such as a VW Golf), costs just over 42,000 euros to own for a period of five years given initial purchase as a new car. By contrast, a comparable battery-electric vehicle costs just over 40,000 euros, when one takes government purchase incentives into account. Battery-electric vehicles are now available in all vehicle classes. To enable consumers to conduct more accurate cost comparisons while also promoting market transparency, upcoming reforms to the Energy Efficiency Labeling Ordinance should require dealers to prominently display the total cost of vehicle ownership for consumers.

Most gasoline-powered cars cost between 29,000 euros and 53,000 euros to purchase. By way of comparison, battery-electric vehicles cost between 30,000 euros and 58,000 euros , when one takes the government purchase incentives into account (specifically, the Environmental Bonus and Innovation Premium). Since the initial purchase price tends to be the most prominent and salient factor in consumer purchase decisions, policymakers should maintain existing purchase incentives for zero-emission vehicles – only reducing them once the cost gap between electric and combustion-engine vehicles has diminished considerably.

In the executive class (e.g. BMW 5 series), the median price of a gasoline-powered car is 77,000 euros over the first five years of ownership, while the comparable figure for a battery-electric car in the same class is 71,000 euros. In most cases, purchase premiums do not play a role because only vehicles with a purchase price of less than 65,000 euros are eligible. In the medium, small, mini, and micro vehicle classes, by contrast, electric vehicles are significantly more expensive than comparable combustion-engine vehicles in the absence of subsidies. In order to make battery-electric vehicles available to prospective buyers on a budget, government support measures should be enacted to ease the purchase of smaller vehicle models. In the executive and luxury classes, by contrast, purchase incentives could already be reduced today

The total cost of ownership for plug-in hybrids without subsidies averages 61,000 euros, compared to 57,000 euros for diesel and non-subsidised battery-electric vehicles. Including government purchase incentives, the median total cost of ownership is around 58,000 euros for a plug-in hybrid and 51,000 euros for a battery-electric vehicle. In addition, their emissions scorecard depends heavily on how they are driven. To ensure that government subsidies actually serve to protect the climate, policymakers should tie PHEV subsidy allocation to vehicle reliance on electrical operation. Specifically, only vehicles that are predominantly driven using electrical energy should be eligible.

The analysis undertaken here is only concerned with new vehicle sales, as this is the starting point for their gradual penetration of the national vehicle stock. The purchase behavior of companies who operate vehicle fleets is particularly important for bringing electric vehicles into circulation, as some 64% of new vehicles sales in Germany are to businesses. Further incentives to support electric vehicle adoption in the used car market would be advised. In addition to adopting purchase incentives for used battery-electric vehicles, policymakers could also establish incentives related to cost of use, such as additional taxes on fossil fuels or the stronger orientation of vehicle taxes to emissions. As electricity becomes cheaper in relation to gasoline and diesel, we can expect higher demand for electric vehicles in the used car market.