Buying an electric vehicle takes decade to recoup investment
Buying an electric car doesn’t necessarily guarantee you’ll save money as reduced fuel costs are "all but redundant" when compared with the high price of electric vehicles.
That's one of the key findings from new Which? research, which compared three electric cars (Peugeot 2008 Allure, Peugeot 2008 Active and Mini EV) to their petrol counterparts, taking into account the initial cost of buying and ongoing running costs (fuel, VED cost and servicing) over three years.
It found that but even after factoring in reduced fuel costs, the extra cost of purchase is huge and despite the government’s Vehicle Excise Duty (VED) and plug-in car grant, it still takes years to recoup your investment - at least a decade.
The survey illustrates the challenges governments face in encouraging motorists to make the switch to electric - leaving aside concerns over range and charging infrastructure.
In terms of specific models, Which found:
- Compared to the Peugeot 208, the electric Peugeot e-208 costs £5,665 more upfront
- While the petrol-powered Mini One costs £2,591 more to run over three years, it would take more than 10 years to recoup the extra cost paid to buy the Mini EV in the first place
In a separate survey of 3,619 people, Which found 41% were open to switching to an electric car but 34% said they were put off by the amount of money they would need to buy one.
According to McKinsey research, there is a cost gap of around $12,000 between electric vehicles and internal combustion engines today. "Apart from a few premium models, OEMs stand to lose money on almost every EV sold, which is clearly unsustainable," it states, adding that battery costs represent the largest single factor in this price differential. It found the payback period is five to six years for an average US buyer driving 13,000 miles a year.
Accelerating EV profitability will, however, require some bold steps, including:
- making tough choices around EV-platform design, including balancing lower material cost with higher capital allocation and maximising volume where possible
- applying more ambitious cost-reduction approaches to EVs, including design simplification, value-neutral decontenting, and aggressive purchasing strategies
- evaluating new potential partnerships with competitors to share R&D, tooling, and production costs for new EV platforms
- considering more creative use of alternative EV-specific business models that can boost
But it forecasts that EVs have the potential to reach cost parity with and become equally - or even more - profitable than ICE vehicles by around 2025, achieving a margin of 2-3 percent per vehicle. New business models, such as fleet sales and battery leasing, could improve profitability.