Personal Finance

All charged up?

Radhika Merwin | | Updated on: Mar 22, 2015




The Budget has extended sops for electric cars. But do they score over conventional cars?

Have you been thinking of going green with electric cars? Apart from being ‘clean’ vehicles, they also save you a tidy sum on fuel bills. But the flip side is that electric vehicles carry steep upfront costs and replacement batteries are exorbitantly priced.

So, if you’re comparing the economics of owning electric vehicles with petrol or diesel cars, the former is worse off.

Back to basics

An electric vehicle is one that is powered by an electric motor rather than a gasoline engine. The rechargeable batteries in an electric vehicle can be charged through a common household electric outlet.

But batteries used in electric cars are not that cost-effective. Automakers worldover now use lithium ion and nickel metal hydride batteries, instead of the conventional lead acid batteries used earlier. But a lithium ion battery costs about $600/kwh, even as battery technology has evolved manifold.

This is one of the main reasons why an electric car sells at a hefty premium to a conventional one. Consider the Mahindra Reva e2o. This two-door hatchback, powered by lithium ion batteries, costs about ₹6.26 lakh in Mumbai, at least 40 per cent higher than a Maruti Alto 800 (we have used this comparison throughout). Also, there are no incentives from the Centre to bring down the cost.

A few State Governments offer some concessions, though. For instance, Delhi has zero VAT and concessions on road tax. Rajasthan and Chhattisgarh Governments also have zero VAT and road tax. Maharashtra, Karnataka and West Bengal also offer VAT and tax benefits to such cars.

Some number crunching

But electric cars score on running costs. Running costs for electric cars is the cost of electricity for charging the battery. For conventional cars, it is the cost of fuel. The distance you drive daily and mileage have a bearing on the running costs.

Mileage in a conventional car is the number of kilometres it runs on one litre of fuel. For the electric car, mileage is its range — the kilometres it runs on a single charge. The Mahindra Reva e2o has a range of 120 km for one full charge; that is, after every 120 km, you will need to recharge the car. This can be done via a normal household outlet at 220V for five hours (for a full charge), thus consuming about 12 units of power. At a power cost of ₹6.5 a unit, the recharge will cost ₹78 for every 120 km.

In contrast, the cost of petrol for a Maruti Alto 800 that runs 16 km to a litre will be ₹495 for the same distance (assuming ₹66 a litre for cost of petrol).

On the face of it, the savings on your petrol bills look sizeable. But sadly, there are other costs to reckon with that detract from the cheaper running costs.

Battery cost

One, the battery has to be replaced after every 50,000 km or so. And the cost of the battery is steep at more than a tenth of the cost of the car. In the case of Mahindra Reva e2o, the company leases the battery to you for a fee, starting from about ₹2,600 a month. But in this plan, while you don’t have to worry about the high one-time battery cost, the lease rent you pay every month takes you longer to recover the premium you paid for buying an electric car.

Let us assume that you drive 50 km a day. If you choose to pay the monthly fee on the battery, then the premium paid for the electric car over the Maruti Alto 800 will be recovered only after eight years. However, if you do not pay the monthly fee for the battery, the payback is halved to four years.

But you will have to replace the battery at the end of two-and-a-half years and the cost of the battery is not expected to come down soon.

Subsidy, please

The Budget has rolled out some goodies for hybrid and electric vehicles by extending concessional duties on goods used in making electrically-operated vehicles and hybrid vehicles. The Government has also set aside ₹75 crore to support the manufacture of electric vehicles.

But industry players are unclear on how these benefits will trickle down to the end customer. Till date, there are no incentives for customers in the form of direct subsidies that other Governments worldover provide.

Traffic congestion and the need to be more eco-friendly present a case for an electric car, at least as a second car.

But for now, the steep upfront cost is a dampener. Better battery range and cost as well as direct subsidies from the Government will be the game changers.

Problem points

High upfront cost

Expensive replacement batteries

Lack of charging points outside homes

Published on March 10, 2018

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