Buying an electric vehicle takes decade to recoup investment

By Dominic Ellis
New Which? research challenges conventional wisdom that electric vehicles are cheaper than ICE models

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. 

Share

Featured Articles

European Commission publishes REPowerEU energy plan

European Commission's REPowerEU energy plan addresses the 'double urgency' of Russia and climate change - and will cost €210bn between now and 2027

Shell Energy Europe and Air Liquide sign renewables deal

From 2023 Air Liquide will purchase 52GWh of solar PV renewable energy a year which will be sourced from SEEL’s portfolio of solar power in Italy

Top 10 actions for reducing fossil fuel demand

New Energy Transitions Commission report highlights short and medium-term actions to build energy security and urges faster renewable electricity roll out

EDF invests in heat pump installer CB Heating

Renewable Energy

Saudi Aramco posts $39.5bn Q1 profit

Oil & Gas

HydrogenOne Capital Growth invests €6mn in HH2E

Renewable Energy