Personal Finance

Spend Smart: Electrify your daily drive

Eswarkrishnan Chellam | Updated on January 17, 2018 Published on July 17, 2016

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High cost and fall in crude price have reduced the charm, but government sops may help



Planning to buy an eco-friendly car that can cut down your petrol bills? Then, e-vehicles (EV) that don’t guzzle fossil fuel to power your ride can fit the bill.

But while these cars are easy on your pocket as far as daily running costs go, a steep upfront payment and a much higher cost to replace the battery can pinch you. At best, these cars can serve as a second car for a city runabout. Falling crude prices have also reduced the charm of such cars in recent times.

Stacking up

The government has stepped in to provide incentives for hybrid and EV buyers. In April 2015, it announced incentives through an aptly named acronym FAME (Faster Adoption and Manufacturing of Electric Vehicles), which is part of the larger National Electric Mobility Mission Plan.

This incentive is available through an upfront reduction in the purchase price range from ₹13,000-₹1.38 lakh for cars, initially applicable in select cities/districts. This incentive is also applicable for two-wheelers and buses. Phase I of the scheme has an outlay of ₹795 crore and unless renewed, will end this fiscal.

The on-road cost (Benguluru) of popular entry-level hatchback from Maruti, Alto 800, is ₹4.26 lakh while the all-electric Reva T2 is ₹7.02 lakh after taking into account the FAME benefit of ₹1.24 lakh. The T2 costs almost 1.6 times more than the Alto.

Both have a seating capacity of four adults. While the Alto is powered by a 3-cylinder 800 cc petrol engine, the T2 is powered by 48V maintenance-free lithium ion battery, claimed to last around one lakh km.

The battery leasing option, which was available earlier, has now been withdrawn, increasing upfront costs.

Let us consider an individual in Benguluru where T2 is manufactured and who drives 10,000 km a year. It is claimed that the T2 has a range of 120 km per charge; after every 120 km, you will need to recharge.

Consuming between 7-8 units of electricity, it takes five hours for a full charge. But using an air-conditioner can easily shave off 10-15 per cent. Lights, another power hungry component, are powered by a lead-oxide battery.

Assuming a practical range of 100 km per charge, electricity cost works out to approximately ₹51 at ₹6.40 per unit, which translates to ₹5,100 for a year

On the other hand, Alto has a claimed mileage of 24.7 km/l as certified by a testing agency. Chock-a-block traffic can cut it down to 15-17 km/l. With petrol at ₹70.46 a litre, the annual expenses on fuel come to around ₹47,000. The user of the T2 can thus expect to save ₹42,000 a year.

While the savings seem significant, it will take the T2 user around ten-and-a-half years to recover the higher initial outlay. This is more than the time you would normally hold on to your car. But if your daily commute is longer in the 55-60 km range and you travel 20,000 km in a year, then the pay-back falls by half to about five years. The EV option may then start making financial sense.

But there is still the battery cost to reckon with. The suggested replacement of the battery pack at ₹1.25 lakh around the one-lakh km mark, weakens the case for owning an EV. While evolution of battery technologies can bring down this cost in future, in the near term, high battery costs are here to stay. On the maintenance front, there isn’t too much difference. Both need to be serviced at the 10,000 km mark, but service costs are almost similar. The cost of maintaining T2 is in the ₹1,500-₹2,000 range, while for Alto it is at ₹2,000-2,500 per service.

Pros and cons

On numbers alone, an electric car may not charge you up. However, there are qualitative reasons as to why you may want to own one. First, you can brag about owing an environment-friendly automobile. Increasing traffic congestion can also act as a key trigger for EVs to gain popularity. EVs score well in stop and go traffic, where cars cannot speed. Engines powered by fossil fuels, on the other hand, tend to operate in the sub-optimal range in these conditions. But the main drawback of owning an EV is the lack of public charging stations.

In the West though, there has been a surge in popularity of EVs. For instance, in early April, over 3.25 lakh reservations of Tesla’s Model 3 were made in its first week of booking. The company is also likely to increase its annual production 10 times to five lakh by 2020.

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Published on July 17, 2016
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