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MPG and What’s Really Important

By Steve Meyer | March 9, 2014

How we spend our money on transportation is a big part of the economy.  The purchase of an automobile is the second largest expenditure after a home.  There are lots of options and because cars are expensive, we tend to weigh the options carefully.  Fuel cost is the most obvious single cost related to the car purchase, but overall purchase price is the barrier to entry for EVs and hybrids.

According to one source, there were approximately 96,000 electric cars sold in the US last year, with sales of Volt roughly flat over last year at 23,000 units.   At an estimated $34,185 selling price that would be over $786 million in revenue last year.  This seems a staggering amount of money, but 23,000 units in a market that makes and sells 16 million cars is really not a lot to get excited about.  Most vehicle companies are unable to break even on a new product introduction with less than 50,000 units of production because of the massive investment required to bring a new car to production.

The fundamental point of the electric car is the mechanical efficiency of the drive train.  By EPA and manufacturers estimates, a pure electric vehicle is able to operate at roughly 100 MPGe.  In this case the MPGe metric helps since the energy equivalence is unequivocal.  It is also consistent with the general claim that gasoline engine drive trains are only 25-30% efficient for transportation.   Cars typically get 25-30mpg.

The IRS allows $.56/mile for vehicle operating expense.  This includes insurance, maintenance, everything.

If you can charge your EV from the grid, the energy cost per mile depending on where you live will be between $.04/mile and $.08/mile.  Given that there is nothing to maintain on an EV, this starts looking very attractive.  If you invest $6500 (guesstimate) on a solar charging system at home, and assuming a 30 life to the equipment, you can produce electricity to charge your car and lower the cost per mile to around $.02/mile.  In all likelihood you will have some extra power, so if you use it or sell it the utility there is additional revenue benefit.

But the efficiency and operating cost benefits are not sufficient to propel the EV to the 1/3 share of the market that it had in the 1920s.  Which is kind of ironic.  It has to be based on lower vehicle costs that make the EV significantly more attractive.

For the short term, EVs are still a niche product.  Purchase of an EV is a preference that only a limited number of people can afford, until something changes.

Maybe the upcoming Tesla battery factory will change the biggest cost factor in the EV, the battery itself.

 

About The Author

Steve Meyer

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