Hang on to Your Car for Now – Then Buy an EV
Plunging battery costs to make electric vehicle prices competitive by 2023
Electric vehicles are cheaper to operate (no gasoline to pump) and maintain (fewer moving parts), but higher sticker prices scared off all but 6% of new car buyers, as of 2020.
That’s about to change.
As early as 2023, experts expect, the cost of building an electric car will be on par with the cost of making a similar gas-powered model.
The reason is the rapidly falling cost of producing the battery packs for electric cars. The way the industry measures this is the price per kilowatt hour (kWh). In 2010, the cost for a battery pack was more than $1,000/kWh, according to Bloomberg BNEF. In 2020 it reached $126. When that price falls to $100 it is expected the cost to build an electric car will be no more than the cost to roll a similar gasoline-powered car off the assembly line. That is expected to happen as early as 2023.
Moreover, an analysis by engineers at Carnegie Mellon University anticipates that by 2025 a battery pack price of around $80/kWh will result in EV sticker prices being lower than similar conventional cars.
That prompts a bit of advice, particularly for those wanting to lighten their carbon footprint while looking after household finances: If you can, wait a few, buy an EV, and save some money. Even if you only wait until EV sticker prices are on par with conventional cars, the lower cost to drive and maintain the EV can reduce your monthly car costs by a few hundred dollars.
With traditional automakers investing tens of billions of dollars to compete against Tesla in the EV market, car buyers could also enjoy vigorous price competition for electrics in coming years.
A 2020 analysis by Consumer Reports estimates that the average lifetime cost to recharge an EV is 60% less than the average cost to refuel an internal combustion engine vehicle. Even if gas prices remain at current lows, the EV fuel costs are about one-third lower.
Improvements in battery mileage are an interesting factor in the fuel cost advantage. Many EV models now have a driving range of at least 250 miles. Based on that fact, Consumer Reports’ calculation presumes that given normal driving patterns for the majority of households, more than 90% of recharging will happen at home, and the need to use expensive fast-charging public stations will be limited to just six times a year on average.
Based on 15,000 miles of driving — a typical first year — Consumer Reports estimates an EV car owner saves nearly $800 in fueling costs compared to a gas car. For an SUV/crossover, the savings for the EV is $1,200 and for pickup enthusiasts, the savings is $1,310.
Fewer moving parts in EVs also make for lower maintenance costs. Consumer Reports estimates average lifetime (200,000 miles) maintenance costs for an EV to average $4,600 in today’s dollars compared to $9,200 for the gas-powered car. Even if you need to shell out $1,500 or so to install an at-home charger, you’re still coming out way ahead.
If waiting isn’t practical — your current car is on its last legs — consider buying a cheap but reliable used car that gets you through the next few years while you wait for the coming sweet spot to buy an electric car.
And even if you don’t see yourself as an electric car type, spending a ton today on a conventional gas-powered car could be an especially risky move when it’s time to trade in seven to 10 years from now. If, as expected, electric cars become the cost-effective choice, the value for an old-school conventional car will likely depreciate even more than does standard today.