Electric cars may be cheaper to run, but the high price and cost of replacing batteries offset these savings

With fuel prices escalating, people are scouting for alternatives to the conventional car. Major automakers have plans to roll out new battery electric vehicles (BEVs) or plug-in hybrid electric vehicles (PHEVs) in the Indian market. While your fuel guzzling cars are stretching your monthly bills, the 65 paisa/km running cost on an electric car may just look as if it seals the deal! But there’s more to the economics of an electric car.

How EVs work

Very simply, an electric vehicle is one that is powered by an electric motor rather than a gasoline engine. You power up the conventional engine by tanking up on petrol or diesel, but in an electric engine, the rechargeable batteries are charged through a common household electric outlet.

Currently, the chink in the electric car’s armour is its batteries. While the early EV models used lead acid batteries (your conventional car batteries), batteries have evolved with Lithium-ion and nickel-metal-hydride (NiMH) now being used worldwide by various automakers. But the technology is far from perfect. As of now, a Lithium-ion battery costs $600/ kwh, which is painfully high. The attempt is to reduce this to almost $200/kwh by 2020 to make it more economical.

Before you wonder why you should worry about these technical aspects, it is this very aspect of batteries in an EV that alters your economics drastically. Electric cars sell at a hefty premium due to the high cost of batteries. Hence, any significant break-through in battery technology can alter the entire landscape for EVs.

Upfront costs

The price of an electric car is much higher than your conventional car. While various Governments world over provide direct subsidy of $5,000-$7,500 per EV sold, automakers in India are only hopeful of some relief in the upcoming Budget. In India currently the price of an electric car is easily at a 45 per cent premium to your conventional car.

Running costs

To compare the running costs between the two, you ideally need to compare the electricity cost for charging your electric car with the fuel cost for your conventional car. To do this you need to know the following:

a) Average kilometres you drive daily

b) Mileage

c) Cost of re-fuelling/recharging.

While mileage in a conventional car is the number of kilometres it runs on one litre of fuel, for the electric car it will be its range — the ‘kilometres’ it runs on a single charge. As a case in point, Mahindra’s REVAi has a range of 80 km for one charge.

This means that after every 80 km you will need to recharge. This can be done at a normal household outlet at 220 V and takes 8 hours to charge. Hence at Rs 6.5/unit power cost, it may take Rs 52 for every 80 km. Whereas, a Maruti Alto 800, at a mileage of 18 km/litre, will cost Rs 314 in petrol for the same distance. Now that’s a sizeable savings on your petrol bills.

So where is the hitch?

Payback time

While the monthly savings clearly are sizeable, don’t forget that it should justify a positive payback on the premium you have paid for the electric car in the first place. We have compared Mahindra’s REVAi to Maruti Alto 800. (Refer to table below). As evident the premium paid over the conventional car in case I (30 km/day) is recovered only after 6 years. This is more than the time you would normally hold a conventional car. However in case II (50 km/day), the payback is halved to 3 years.

With an expected battery life of 50,000 km, the battery will need to be replaced at the end of 4.5 years in case I and after 2.7 years in case II (see table). While higher usage will reduce your payback time, it will also mean replacing your battery earlier, the cost of which is steep at approximately Rs 72,000.

Game changer

While traffic congestion and low average speeds present a fair case for an electric car at least as a second car option, the driving range needs to significantly improve to consider it for anything beyond running it for your daily errands.

Also the steep battery cost with no subsidy from the Government currently is a huge dampener. As automakers introduce newer models in India, better range, battery cost and Government’s active participation can make a big change to the economics of going electric.


(This article was published on January 19, 2013)
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