The actual cost of fueling an electric vehicle (EV) comes to $17.33 per gallon of gasoline, reveals a recent report from the Austin-based think tank Texas Public Policy Foundation (TPPF).
Pro-EV groups claim that electric vehicles are cheaper in the long run although they’re initially more expensive than internal combustion engines. However, the Oct. 25 report from the TPPF dismisses the claim. It points out that various subsidies, regulatory credits, and charging costs of an average model year 2021 EV add $53,267 to the vehicle’s price over a decade.
Assuming that the EV is driven for 10 years at 120,000 miles, this would make the “true cost of fueling” equivalent to an EV owner paying $17.33 per gallon of gasoline—many times higher than the $1.21 per gallon claimed by other estimates.
Gas prices nationwide averaged $3.55 per gallon—less than one-fourth of the “true cost” of EV fueling—as of Oct. 27, according to data from the American Automobile Association (AAA).
“This analysis shows that electricity is a long way from becoming a cost-effective transportation fuel compared to gasoline,” the report reads. “Without increased and sustained government favors, EVs will remain more expensive than ICEVs [internal combustion engine vehicles] for many years to come.
“Even with these subsidies, EVs have been challenging for dealers to sell and why basic economic realities indicate that the Biden administration’s dream of achieving 100 percent EVs by 2040 will never become a reality.”
The report criticized “EV apologists” for claiming that the cost of EVs would eventually come down because of economies of scale and technological breakthroughs.
“Benefits of economies of scale have largely been reached by most lithium-ion battery manufacturers,“ the report reads, ”[and] costs for those batteries have largely ended their downward trend of the past decade.”
Any additional cost improvement on batteries would be “hard won,” the report states, while noting that lithium prices are trading at four times the price they were in 2019.
Despite the massive financial and regulatory benefits being offered for EVs, there are more than four times more hybrid and plug-in-hybrid vehicles than full-electric vehicles registered in the United States, according to the report.
“Toyota estimated that the amount of materials to make one EV battery can be used to make 90 hybrid batteries and that those 90 hybrids will result in 37 times more emissions reductions over their lifetime than one EV,” the report states.
EV Subsidies and Charging Costs
The estimate of $53,267 in extra cost of an EV is split into two groups. The first group includes costs accumulated through subsidies, regulatory credits, and electric grid use:- Of the amount, $8,984 is accounted for by various state and federal subsidies, which includes the $7,500 EV credit provided by the federal government.
- Regulatory credits contribute $27,881. Two federal regulatory standards make the biggest contribution in this regard—the Corporate Average Fuel Economy standards and the U.S. Environmental Protection Agency’s greenhouse gas emissions standards.
- In addition, the use of EVs puts a significant strain on the electric grid, which results in an average of $11,833 in socialized costs per EV.
In an Oct. 25 statement, the TPPF claimed that these “hidden costs” are “socialized on to taxpayers and gas vehicle owners.”
“The Biden administration and leftist states such as California have pushed for widespread electrification in less than 20 years through government subsidies and coercive regulations, but the price you see in the lot is not the true cost of an electric vehicle,” Jason Isaac, a director at the foundation, said.
Falling EV Demand
The TPPF report cites an analysis by auto-dealer data company Cox Automotive to state that “car lots are swelling with unsold EVs.”In the analysis, Cox Automotive states that the average inventory for EVs topped more than 92,000 units on the ground at dealer lots in the second quarter of this year. This was up by 342 percent compared with the second quarter of 2022.
The report also claims that Ford is losing “over $70,000 on each EV it currently sells,” citing an analysis by podcaster Robert Bryce.
Ford had reported a $1.08 billion operating loss in its EV business during the second quarter. With the company selling 14,843 EVs during the period, the loss per vehicle amounted to about $72,762, according to the analysis.
Several EV executives and analysts are becoming less bullish on the speed of EV growth, growing more apprehensive about the tough economics of the market.
For instance, Ford recently stated that it’s slowing the pace of investments in the EV and battery manufacturing sector because of low demand. Chief Financial Officer John Lawler revealed that the company will “push out” about $12 billion in investments, according to Axios.
GM has done away with its goal of producing 400,000 EVs from 2022 to the first half of 2024, with CEO Mary Barra recently telling analysts that the company is taking steps to “adjust to slowing near-term growth,” according to the outlet.
Tesla owner Elon Musk has raised concerns about the effect of high interest rates on EV demand.
Amid Ford losing $70,000 per EV and the buildup of electric vehicle inventory in dealer lots because of lower-than-expected sales, the TPPF report warns that “it is likely that automakers will be requesting even more direct subsidies in the coming years.”
