Low Charging Costs Significantly Reduce Lifetime Cost of Ownership of Electric Vehicles for Fleet Operators

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Faced with pressure to reduce both the costs and the environmental impacts of their vehicles, fleet managers are seeking the most cost-effective ways to “green” their vehicle fleets while ensuring that operations continue to run smoothly.  While a wide array of alternative vehicle options are now available on the market, many of them come with high upfront price premiums compared to traditional internal combustion engine (ICE) vehicles.  According to a recent report from Pike Research, a part of Navigant’s Energy Practice, the low “fuel cost” (i.e. cost of charging) of electric vehicles, including both plug-in hybrid and battery electric models, brings their total cost of ownership (TCO) to below those of conventional vehicles or other types of alternative fuel vehicles, offsetting the higher average vehicle prices.

Table 1.1 shows the results of the TCO analysis for light-duty sedans based on current fuel prices in the United States and assuming 120,000 lifetime miles on the vehicle. The key factors in this comparative TCO analysis are the upfront vehicle price and the fuel price.  The lowest alternative fuel option is the BEV, assuming that the fleet operator is able to claim the $7,500 federal tax credit. This is because of the high efficiency of the electric drivetrain combined with the assumption of relatively low electricity rates for charging.  It is important to note that this analysis does not include the cost of infrastructure, which would potentially add several thousand dollars to the total cost to the fleet operator to adopt BEVs. The TCO also does not assign a price to the opportunity costs that result from the BEV’s 100 mile range. This analysis assumes that a fleet operator will only adopt a BEV if it is appropriate for that fleet’s service parameters. For a BEV, this would mean that the fleet is driven in a fairly limited geographic area and the vehicles are returned to a charging station location each night.

 Battery electric vehicles (BEVs) offer the lowest TCO of any of the 17 vehicles compared in the report, when taking into account the federal tax credit available for electric vehicle (EV) purchases.

“One of the primary benefits of BEVs is their very high efficiency compared to conventional ICE vehicles,” says senior research analyst Lisa Jerram.  “BEVs also offer higher overall fuel efficiency than conventional hybrids and low electric range plug-in hybrids.  That’s a major reason why battery electric vehicles have been experiencing a resurgence of automaker and consumer interest over the past few years, particularly for fleet operations.”

Fleet operators are more likely than consumers to focus on the total cost of ownership rather than just the upfront cost, making fleets an attractive early market for electric vehicles.  Many government and utility fleets, which are often involved in testing vehicles, have already begun implementing Level 2 (up to 19.2 kilowatt) charging systems.  Nevertheless, many fleet managers continue to see the cost of EV charging equipment as more of a concern than do the auto manufacturers.

The report, “Total Cost of Ownership of Alternative Fuel Vehicles for Fleet Operators”, provides a comparative TCO analysis across various alternative fuel vehicle categories including biodiesel, ethanol/flex-fuel, propane/autogas, compressed natural gas, stop-start, hybrid electric, plug-in hybrid electric, battery electric, and fuel cell vehicles.  The primary focus is on fleet vehicles as they would operate in North America, with additional coverage provided for Western European vehicles and operations.  Because each fleet’s experience is different, this report also includes a spreadsheet that can be customized with the fleet operator’s own data. An Executive Summary of the report is available for free download on the Pike Research website.

The key factor in the comparative TCO analysis are the upfront vehicle price and the fuel price. Most alternative fuel or alternative propulsion vehicles carry a price premium over conventionally fueled vehicles. The one exception is the flex-fuel vehicle (FFV), which some OEMs offer as a standard feature.... Pike Research’s TCO analysis also looks at a range of fuel prices to determine at what fuel price the fleet operator is able to redeem the cost premium through fuel savings (and, to a lesser degree, maintenance savings). The analysis includes the TCO for a vehicle life of 120,000 miles and 75,000 miles.

Chart 1.1 below shows one example of a TCO comparison with varying fuel prices at 120,000 lifetime miles. The example looks at mid-size sedans with four cylinders and 2.4 liter (L) engines. This is a typical vehicle class in use by fleet operators and it also offers one of the greater ranges of alternative options. The assumptions used for this chart include:

Low price gas: $3.5/gallon
Mid-price gas: $4.0/gallon
High price gas: $5.0/gallon
Low price diesel: $4.0/gallon
High price diesel: $5.0/gallon
Low price B20: $4.2/gallon
High price B20: $5.2/gallon

Pike Research www.PikeResearch.com

Press Release dated August 27, 2012