A major Dutch leasing company, LeasePlan, has thought a lot about the total cost of ownership of a vehicle. It is getting more and more bullish about electric vehicles. Last year it released a white paper on the topic, after conducting nearly 1000 vehicle ownership scenarios in 13 European countries. Aside from sharing some tips for anyone trying to conduct their own comparisons, including notes about how you simply cannot compare apples and oranges in a purely objective way, the firm offered a handful of interesting takeaways. It also had one somewhat surprising conclusion.
On Average, Total Cost of Ownership Lower with EVs
“All the scenarios were averaged across all countries and compared within the same segment (e.g. a B-segment ICE vehicle was compared with a B-segment EV vehicle). The results show that the EV has a lower TCO than the ICE vehicle in 508 of the 912 comparison scenarios, equating to a majority at 56%. The ICE vehicle has a lower TCO than the EV in the remaining 44% of the scenarios.”
First of all, let’s just highlight that the percentages here could be 100% to 0% or o% to 100% if you adjusted the assumptions enough, and these comparisons are built on big assumptions. Nonetheless, I think LeasePlan wanted to try for a fair spread of common scenarios and see how things played out. As I always recommend when I publish my own TCO reports, everyone should run the numbers for their own expected scenario.
Where are the Main Cost Differences?
“There are clear differences in the average cost elements between ICE vehicles and EVs, as illustrated in the figure below. The costs of ICE vehicles have been set as the baseline and then the EV costs have been compared against them (based on similar vehicles). This method clearly shows the differences between EVs and ICE vehicles. This data shows that, on average, the costs of an EV are actually 5% lower than for a similar ICE vehicle.”
There are a few things I think I should note here. First of all, remember that this is Europe and there are some significant tax incentives for EVs in some European countries. Maintenance and fuel costs are expectedly much lower for EVs.
The initially surprising assumption/finding was greater depreciation (and interest) with EVs. That struck me as odd for a moment simply because the Tesla Model 3 is expected to have, and so far has, much less depreciation than competitors — or any other cars for that matter. Then I remembered that, otherwise, electric vehicles have had much more depreciation for two main reasons: 1) The big government incentives mean that a used car immediately, on day 1, gets a huge portion of its “value” knocked off. If you can get a new EV and a €4,000 grant, the same EV used, even if for 1 minute, needs to have €4,000 cut off its price. 2) Technology in the EV field is improving rapidly and costs coming down at a quick pace as a result, which makes it harder to buy a 2017 EV in 2020, or probably a 2020 EV in 2023. Also, the lumped interest in with depreciation for some reason.
In Some Countries, Makes No Financial Sense to Not Go Electric
We’ve seen tremendous EV market share growth in some European countries recently. Those include the UK (7% in March and 34% in April), Norway (56% in 2019 as a whole, 75% in March and 70% in April), and the Netherlands (15% in 2019 as a whole and 12% in 2020 so far). It turns out, in those markets and Belgium, it’s very hard for an electric car to lose a cost of ownership comparison with a fossil-powered car.
LeasePlan shared some of the takeaway results for head-to-head comparisons. The Nissan LEAF did very well against the Volkswagen Golf and the Audi e-tron did very well against the Mercedes GLE. The one that should surprise you is the Tesla Model 3 versus the BMW 3 Series. But there are reasons for the results. First of all, LeasePlan used the Model 3 Long Range, not the Model 3 Standard Range Plus, which is a large difference if your focus is cost. Secondly, remember that this is Europe, and until the German Tesla gigafactory pops up, the Model 3 will have a significantly higher cost in Europe than the US or China.
Any more thoughts on the white paper? Share your thoughts in the comments below.
All images courtesy LeasePlan