# microeconomics of electric vehicles

## the long-term benefits of buying electric

The story of green technologies is a familiar one.

People think they're a good idea, but, since the initial investment in an EV is often higher than for a comparable gasoline car, most consumers prefer to wait until the price goes down.

At the end of the day, the bottom line trumps good intentions. Short term gains outweigh long-term effects on the environment, health and global security. You can't fault the public for acting out of their pocket, and we don't intend to. The future of this planet depends on aligning rational self interest with the public good, which is precisely what makes EVs such an attractive alternative to oil-powered cars...

**The story of electric vehicles and your wallet is not as straightforward as it would at first appear.** If you take the time to crunch the numbers on what it actually costs to own an EV over time, you will come across a startling discovery — **EVs actually have a lower Total Cost of Ownership than their gas guzzling grandparents!**

To support this contentuous claim, we have conducted a thorough microeconomic analysis, comparing the 2009 Dodge Caliber with the 2010 Nissan Leaf. Both are "compact cars" with a very similar look, feel and size. Taking into account government statistics on the average price of electricity and gasoline, and AAA figures on the annual price of car maintenance, we calculated the total costs of the Caliber and the Leaf over periods of 1, 5, and 10 years, or 15,000 miles, 75,000 miles, and 150,000 miles.
**Here is what we found...**

vs.

**Conclusions**

The retail price of a Nissan Leaf is $10,370 more than that of a Dodge Caliber. Yet it costs 17.1 cents/mile to drive a Dodge Caliber, and 4.1 cents/mile to drive a Nissan Leaf (taking into account the cost of gasoline, the cost of electricity *and maintenance costs*).

• After 5 years, the difference in retail price between the Caliber and the Leaf is almost entirely paid for in gasoline and maintainence savings. After 5 years, the Caliber costs $32,455 to buy, drive, and maintain, while after the same time period, the Leaf costs $33,410.

• After 10 years, the long-term economic advantage of a Nissan Leaf is clear. It costs $45,280 to buy, drive, and maintain a 2009 Dodge Caliber SRE over 10 years, and $36,165 to buy, drive, and maintain a 2010 all-electric Nissan Leaf over 10 years. **So, over 10 years, or 150,000 miles of driving, the owner of a Nissan Leaf saves $9,115 over the owner of a Dodge Caliber. **

• The owner of a Nissan Leaf also saves 6000 gallons of gasoline from being burned and emitted into the atmosphere, which would have added 116,400 lbs of CO_{2} to the atmosphere.

Here's a breakdown of the numbers...

Item |
Dodge Caliber | Nissan Leaf |

Retail Price | $19,630 | $30,000 |

Energy Use | 25 mpg (gas) | 100 mi / 24 kWh |

Energy Cost | $2.93 / gal | $0.12 / kWh |

Energy Cost per mile | 11.72¢ | 2.98¢ |

Energy Cost, 1 Year | $1,758 | $447 |

Energy Cost, 5 Years | $8,790 | $2,235 |

Engery Cost, 10 Years | $17,580 | $4,470 |

Maintenance, 1 Year | $807 | $169.50 |

Maintenance, 5 Years | $4,035 | $847.50 |

Maintenance, 10 Years | $8,070 | $1695 |

Total Cost, 5 Years |
$32,455 |
$33,410 |

Total Cost, 10 Years |
$45,280 |
$36,165 |

**And, here is how we got these numbers...**

**STEP 1: Assumptions**

• The price of an automatic-transmission 2009 Caliber SRE is $19,630.

• The price of a 2010 Leaf is expected to be between $25,000 and $30,000. For the benefit of doubt, we will call the Leaf's price $30,000.

• We will assume that the two cars' registration fee, taxes, and insurance costs are the same.

• We will assume that the average amount of miles driven per year by a passenger vehicle is 15,000, as reported by the US Bureau of Transportation Statistics.

**STEP 2: Calculating Total Cost of Ownership for a Dodge Caliber**

An automatic-transmission Caliber has city 23 mpg, and highway 27 mpg, making a combined 25 mpg.

According to the US Department of Energy, the 5-year average price of regular-grade gasoline across the US is ~$2.93 dollars/gallon.

Therefore, on average, every 25 miles driven with a Caliber costs $2.93.

Or, each mile driven costs:

293 / 25 = 11.72 cents/mile

At 15,000 miles/year, this costs:

15,000 miles x 11.72¢ = 175,800 cents or $1758 on gasoline/year

After 5 years, or 75,000 miles:

$1758 x 5 years = $8,790

After a lifetime of 10 years, or 150,000 miles, gasoline costs for a Caliber:

150,000 x 11.72 = __$17,580 spent on gasoline over 10 years, or 150,000 miles__

But, we also have to take maintainance costs into account. According to AAA's 2009 edition of Your Driving Costs, maintenance on a medium-sized sedan such as the Caliber costs 4.51 cents/mile, and the cost of tires is 0.87 cents/mile.

Therefore, total cents/mile cost of maintaining (tire cost + maintenance cost) a Caliber is:

0.87 + 4.51 = 5.38 cents/mile

After 1 year, or 15,000 miles, of driving, this amounts to:

(4.51*15000) + (0.87*15000) = $807

After 5 years, or 75,000 miles:

807*5 = $4,035

After a lifetime of 10 years, or 150,000 miles, maintenance cost for a Caliber:

807*10 = __$8,070 spent on maintaining a 2009 Dodge Caliber SRE over 10 years, or 150,000 miles__

__$45,280 spent on purchasing, driving, and maintaining a 2009 Dodge Caliber SRE over 10 years, or 150,000 miles.__

**STEP 3: Calculating the Total Cost of Ownership of a Nissan Leaf**

• The Nissan Leaf has a a battery capacity of 24 KWh (kilowatt hours).

• According to the US Department of Energy, the average 2009 retail price of electricity per kilowatt hour is 11.47 cents.

Taking into account 2 KWh of energy loss during charging, cost of fully recharging a Leaf is:

26*11.47 =298.22 or $2.98

The range of the Leaf is 100 miles. Therefore, the Leaf's electricity cost per mile is:

298.22/100 =$2.98 cents/mile

Therefore, 1 year, or 15,000 miles of electricity costs for a Leaf are:

2.98*15000 =44700 cents or $447 on electricity/year

After 5 years, or 75,000 miles:

447*5 =$2,235

Taking into account a steady 3.4% annual rate of inflation over 5 years,

(462.20)+(477.91)+(494.16)+(510.96)+(528.34) =$2,473.57

After a lifetime of 10 years, or 150,000 miles, electricity costs for a Leaf are:

447*10 =$4470

Taking into account a steady 3.4% annual rate of inflation over 10 years,

(2473.57)+(546.3)+(564.87)+(584.08)+(603.94)+(624.47)

__=$5,397 spent on electricity over 10 years, or 150,000 miles__

The cost of maintenance with a Leaf, however, requires a different cost-analysis than that of the Caliber. Having no internal combustion engine, or moving parts, a Leaf, like all pure-electric cars, can do without oil and filter changes, transmission fluid flushes, and coolant flushes. Even the brake pads need virtually no work, as the car is slowed down in majority by regenerative braking. The documentary film Who Killed The Electric Car? features testimony from mechanics stating that the only work they ever did on electric cars was to rotate the tires every 5,000 miles and fill the windshield wiper fluid.

Therefore, the tire cost of 0.87 cents/mile can be added to the maintenance cost of a Leaf.

Yet, only a minute fraction of the AAA calculated 4.51 cents/mile maintenance cost for gasoline mid-size sedans that was used to calculate a Dodge Caliber's maintenance cost can be applied to the Nissan Leaf.

Cost of refilling windshield wiper fluid is ~$20 annually. Per mile, this is:

2000/15000

=0.13 cents/mile

There is the cost of replacing the brake pads, however these require replacement considerably less frequently with a Leaf than with a Caliber. Due to a Leaf's regenerative braking capability, in most cases, it is reverse torque created by the electric motor, and not friction created by brake pads rubbing against the wheels, that slows down forward momentum. City stop-and-go driving, which accounts for the bulk of wear and tear on brake pads, is handled almost exclusively by this regenerative braking system. Brake pads are seldom used - only for panic stops and occasionally during highway driving.

As a result, brake pads on an electric vehicle need changing only once every 100,000 miles, if that. Therefore, during a Leaf's 10-year, or 150,000 mile lifespan, we can assume the brake pads will be replaced, at most, one time.

Brake pad replacements costs ~$200. Spreading this cost over 10 years, or 150,000 miles, this is:

200/10 =$20/year

In terms of cents/mile, this works out to:

20000/150000 =0.13 cents/mile

Therefore, total cents/mile cost of maintaining a Leaf (tire cost + windshield wiper fluid cost + brake pad replacement cost), is:

0.87+0.13+0.13 =1.13 cents/mile

Over 1 year, or 15,000 miles, of driving, this amounts to:

1.13*15000 =16950 cents or $169.50

Over 5 years, or $75,000 miles of driving:

169.5*5 =$847.50

Taking into account a steady 3.4% annual rate of inflation over 5 years,

(175.26)+(181.22)+(187.38)+(193.75)+(200.34)

=$937.95

After a lifetime of 10 years, or 150,000 miles, total maintenance cost for Nissan Leaf is:

169.5*10 =$1,695

Taking into account a steady 3.4% annual rate of inflation over 10 years,

(937.95)+(207.15)+(214.2)+(221.48)+(229.01)+(236.8)

**=$2,046.59 spent on maintaining a Nissan Leaf over 10 years, or 150,000 miles**

Combining maintenance, tire, and electricity costs, the cost to operate a Leaf over 10 years is:

4470 + 1695 =$6,165

Taking into account a steady 3.4% annual rate of inflation over 10 years,

(5397.23)+(2046.59) =$7,443.82

Including the retail price of an all-electric Nissan Leaf, this adds up to:

30000 + 7443.82

**=$37,443 spent on purchasing, driving and maintaining an all-electric Nissan Leaf over 10 years, or $150,000 miles.**