I’ve been considering buying an electric car recently.
I currently have an old petrol car that’s getting towards the end of its life so am shopping around for something new.
One model I’ve been looking at is an MG ZS, a smallish SUV. It provides an interesting wee case study because it comes in both traditional petrol engine (1.5L straight 4) and fully electric (50 kwh) versions. The car itself suits my family’s situation. The shorter range of 320km for the electric car is not a problem for us: 99% of our driving is less than that and on the rare occasions we go further we’d would always take a break by that point anyway so it’s no big deal charging at the same time.
Currently as a family we go through about 600 L of petrol a year. At current petrol prices this is about $1,700 per year, but I expect that to increase in coming years. If we had an electric car the same amount of driving would be around $120 in electricity.
I’ve graphed the costs of the two cars over the first ten years of ownership below: electric car in green and petrol car in blue. The two blue lines are for different petrol prices – dark blue is assuming prices continue to grow at the current rate (roughly 4% each year), light blue is assuming a higher 20% p.a. growth rate. This number is completely arbitrary but is just what I guess is probably a bit closer to what it will need to be to not kill the planet.
You can see that at current petrol price growth rates an electric car will pay for itself in about 9 years. If petrol prices rise quicker it will pay for itself quicker: more like 6 years.
Note that the green line includes the Government clean car rebate of $8,600. If that wasn’t around, then the purchase price goes up to $50,000 and the payoff extends out to 11-12 years (for the 4% line). In other words, the rebate changes the economics quite significantly.
In some ways, paying out the extra for an electric car is placing a bet that petrol prices are going to go up, and faster rather than slower. In my mind this should be a safe bet for two reasons: (a) they’re not making any more oil and (b) the price of carbon is only going to one way and it is included in the price of petrol.
In reality it’s not a safe bet because politicians keep trying to artificially lower the price of petrol to stay in power. Ardern has already done this once. The commerce commission has recently been granted power to keep on doing this in future.
A few other points to note about this quick analysis:
- If you are about to put down $20-30k on a car, and you don’t regularly do 300+ km trips without stopping, then it probably makes sense to spend an extra $15k odd on a car that doesn’t need petrol.
- It stacks up even if you do relatively low amounts of driving. It will stack up more if you do more.
- It probably doesn’t stack up if your alternative is to just not buy a car, or to buy something cheaper like an old second-hand petrol car.
- This assumes electricity prices don’t grow significantly. Even if it turned out that they did grow I don’t think it would change the conclusion.
- As well as the $8,600 rebate, government is also providing low interest (1%) loans to help with the initial outlay. The rebate scheme doesn’t have an end date but I suspect it will probably finish up mid next year when they’ve said they’re bringing in a new cash-for-clunkers scheme which will be more targeted to lower-income households.
- It assumes similar costs for tyres, servicing, maintenance, on road costs etc. This isn’t quite true but it’s complicated so just keeping things simple at this point.
Based on this (especially the prospect of the rebate finishing up), I decided to take the plunge and buy an electric car. I put my order in, but unfortunately (or maybe fortunately), the demand for these things has completely outstripped supply and it’s going to be 6 months before the factories can catch up to my order.
Hopefully the factories can scale up quickly. And hopefully I win my bet, not just for my sake but for everyone’s.