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The Total Cost of Ownership (TCO) of Battery Electric Vehicles (BEV) is still not totally competitive with traditional powertrains

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In the frame of our ICDP research on the impact of BEV technology on aftersales, we focused - amongst other things - on the total cost of ownership comparison between mainstream BEV models and their traditional powertrain counterparts. We led this comparative analysis in all EU5 markets.

Our TCO assessment is based on a set of specific variables including the registration and ownership tax, the running costs (i.e. fuel and electricity costs, battery leasing fees, tolls and parking fees), the maintenance and repair costs, the insurance premium at full rate, the wall-box installation including possible grant from OEM or government and the residual value of the car after 4 years and 60,000km including a purchase grant from local administration.

Our TCO analysis is illustrated by 3 Renault branded vehicles:
  • The Renault ZOE R90
  • The Renault Clio Petrol 0.9 TCe energy
  • The Renault Clio Diesel 1.9 DCi energy
All these cars are assumed to have been acquired new in 2014. The annual distance driven is of 15,000 km whatever the drive train. The holding period is of 48 months.
In a first phase, we assessed TCOs on all three vehicles have been bought outright

After a 48-month holding period, both internal combustion engine model TCOs are lower by around 8% compared to the BEV’s one in France. Across the 5 markets surveyed, France is the market where the difference is the thinnest. With an absence of government purchase grant, Italy has the largest gap with a 20% difference on average between traditional and electric powertrains. In the other markets (Germany, Spain and the UK), gaps sit in-between these ‘extreme’ values.

In terms of respective weight, the residual value loss is by far the main factor impacting the TCO of the 3 models surveyed. The residual value loss of the Zoe is starker than that of ICEs. Together with the battery leasing fees, the residual value loss represents more than 60% of the BEV TCO.

For the other major items:
  • The insurance premium costs are comparable across all 3 models.
  • Due to fuel and electricity price differences, the running costs of the BEV are largely lighter than that of ICEs. 
  • In terms of repair and maintenance, BEVs are reputed as being less demanding. This translates into repair and maintenance costs including tyres which are assumed to be c.40% lower compared to the ICE models average.

For the least impacting items:

  • BEVs - in France and in some other markets - benefit from a registration and/or ownership tax exemption
  • The TCO of the Zoe is marginally impacted by the cost related to a wall box installation
In a second phase, TCOs have been assessed considering that all three vehicles are leased via a personal contract purchase (PCP)
For the purposes of our analysis, we have taken a ‘clean’ approach for the PCP i.e. no part-exchange or customer deposit to complicate matters at the start, and equally no complication of rolling the customer into a new deal at the end.  Customers (and their deals) may be slightly more complex than this in real life!

The TCOs of our 3 models are assessed at the end of a 48-month holding period. For data availability constraints, the analysis has been run in France and Germany only. Our work shows that the gaps between BEV and ICE models close up in all cases.  At maximum, the Zoe TCO is 12% higher than its traditional engine counterparts - i.e. Clio petrol engine in Germany. At the other end of the spectrum, the Clio Diesel engine TCO approaches that of the Zoe. Thus the Zoe TCO is only 1.1% higher in France and the gap increases up to 5.3% in Germany.  This might mean that – through the rental fees - the OEM is taking part of the RV risk in charge?

Nevertheless, in any case today, the TCO of BEV is still not totally competitive with traditional powertrains.

However according to the Bank of America, the combination of increasing oil prices and decreasing battery costs should drive a tipping point between ICE and EV TCOs by 2022-2023 in Europe.

Oil prices should increase by 32% by 2025. In the same time, battery prices should drop from $227/kwh in 2016 down to less than $100 in 2030. This should drive the share of battery cost in medium-size electric car production costs from 50% today down to 18% by 2030.

The remaining question is to know to what extent car manufacturers will reflect these cost savings in the car retail prices …

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