Bank of America Merrill Lynch: UK Tesla Model 3 & Other EV 3-Year Total Cost of Ownership Analysis Shows EVs Much Cheaper than Fossil Competitors

We’ve published numerous analyses of our own on the total cost of ownership of the Tesla Model 3 and Volkswagen ID.3 compared to top gasoline competitors. However, if you don’t trust research from CleanTechnica, perhaps you’ll find the work of a major international financial firm more palatable. A recently published report from Bank of America Merrill Lynch (BAML) that was passed along to CleanTechnica dove into this topic for the UK. The results will not be surprising to regular CleanTechnica readers, but they are dramatic nonetheless, especially when considering coming incentive changes in the country.

A few quick notes before diving in here: Average miles driven in this analysis are lower than for most of CleanTechnica‘s because the analysis is for the UK and people drive considerably less in the UK than the US. Additionally, the analyses are for 3 years, whereas CleanTechnica‘s were for 5 years, and since EVs save consumers money when it comes to operations and maintenance, that means the savings should be higher if you extend the UK comparisons out to 5 years. The UK’s coming incentive change for EVs is one of the most interesting and important parts of the analyses, but as you’ll see, EVs are already winning even without the incentives. That said, to compel change (which humans tend to be naturally averse to), bigger savings and the limited availability of subsidies are very important.

The name of the report was clear enough: “Why your next company car is probably electric.” Jumping to some of the key conclusions for people buying company cars, once coming changes to UK incentives for EVs are implemented:

• A Tesla Model 3 will save you several thousand British pounds over 3 years compared to a fully petrol-powered BMW 3 Series or even a BMW 3 Series PHEV.
• An Audi e-tron will save you several thousand British pounds over 3 years compared to a diesel-powered Audi Q5.
• A Nissan LEAF will save you several thousand British pounds over 3 years compared to a petrol-powered Ford Focus.
• An MG ZS EV will save you several thousand British pounds over 3 years compared to a diesel-powered Nissan Qashqai.

Here’s BAML’s way of summarizing those findings in one line: “UK tax changes make EV company cars exempt from tax to employees from 2020; combustion engine cars to cost 15–22x more vs EVs.”

Comparing the costs for a couple of popular EVs today versus in 2020, “We estimate that EV company car drivers would pay just £10pm in BIK tax on a Nissan Leaf (vs £168 today) & £14pm on a Tesla Model 3 (vs £218) for example.” Later in the report, they write, “In summary, a Nissan Leaf would be 15 times less per month than a Ford Focus, or Tesla Model 3 22x less than a BMW 3 Series petrol.”

Some top conclusions from the analysis regarding retail customers were:

• A Tesla Model 3 would be cheaper to own over 3 years than a petrol-powered BMW 3 Series or BMW 3 Series PHEV with the UK’s EV subsidies included, or approximately the same price as the petrol-powered version without the subsidy.
• A Nissan LEAF would be cheaper to own over 3 years than a Ford Focus — with or without subsidy.
• An MG ZS EV would be cheaper to own over 3 years than a Nissan Qashqai.

The Bank of America Merrill Lynch analysts also ran some “fleet” (high-mileage) scenarios. The summary finding: “for fleet use case (20k miles per year), EVs are 12–32% cheaper than ICE alternatives. When combining these TCO savings with BIK tax, we demonstrate between £8k (Nissan Leaf vs Focus) to £20k (Tesla Model 3 vs BMW 3 Series) savings over 3 years for companies and their employees combined for choosing an EV over combustion engine alternative.”

You may now be wondering, how many UK car buyers are in one of these more appealing, high-savings categories? BAML reports that all fleet sales combined account for 57% of registrations in the UK (and 59% in Europe). Company cars account for 35% of sales. So, basically, electric cars crush the petrol or diesel alternatives for around a third of the population of car buyers, and they’re cheaper or at least competitive for the other two-thirds.

As Maarten Vinkhuyzen has written for us before, UK electric car purchases are expected to explode in 2020 due to the coming tax changes, which were announced in July 2019. However, the changes are not going to be implemented on January 1 — they come into effect in April 2020. We’ll see what happens at that time, but I expect new records for EVs and wouldn’t be surprised to see the Model 3 take the #1 spot overall amongst passenger vehicles in the UK. Stay tuned — 2020 should be a wild ride.

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