Market News

 June 14, 2013
Other electric-car costs can offset cheap fuel

 The government created a stir this week when it said that the power to run an electric vehicle costs only about one-third as much as the cost of gasoline to power a similar vehicle for the same distance.

While that was celebrated by backers of electric cars and plug-in gas-electric hybrids, the Energy Department formula deals only with fuel cost. It leaves out some key financial and environmental factors that should be considered in owning an electric vehicle.

The government's formula, which adjusts as fuel prices do, said Wednesday that owners of electrified vehicles would spend an average $1.14 to go as far as owners of gasoline cars do on one gallon of gas, which averages about $3.63 nationwide, according to travel consultant AAA.

Electric cars' low equivalent fuel cost is because of cheap electricity to recharge batteries. It's cheap because about two-thirds of it in the U.S. is generated by burning low-cost coal and natural gas. But coal isn't always clean-burning, and natural gas, while cleaner, still has carbon emissions blamed for climate change.

Thus, the DOE calculation shines a very bright light on the cheap fuel vs. clean fuel dilemma that has some saying there should be greater environmental concern about power plants before rushing headlong into electric cars.

"Gasoline vehicle efficiency is already improving by nearly 4% per year, while emissions from U.S. electric power generation are not even declining by 1% per year," says John DeCicco, a research professor at the University of Michigan Energy Institute and professor at the School of Natural Resources. "If you think that electric cars will be needed someday, you first have to greatly cut carbon emissions from power generation."

The DOE also does not address plug-in car financial issues that offset fuel costs. Electric cars:

--Remain expensive. The Chevy Volt, a plug-in hybrid, starts at $39,995. Chevy currently offers a $4,000 rebate and -- for those who qualify -- the federal government kicks in a $7,500 income tax credit subsidy. Even so, that leaves the cheapest Volt at $28,495, or $8,605 more than the lowest-price Chevy Cruze, on which Volt is based, and which has more room for passengers.

Ford's electric Focus starts at $39,995, or $30,495 after the $7,500 tax credit and a Ford rebate of $2,000. The gasoline Focus with automatic starts at $18,090 and has more trunk room because there's no big battery back there.

Some automakers are offering tempting lease deals on plug-ins, down to $199 a month. But as with any lease, once it ends, you're left with nothing. You have to hope new low-price lease deals are available, or be willing to make a higher monthly payment to get a replacement car.

--Need expensive accessories.Installing a 240-volt home charger for a plug-in hybrid or electric car -- pretty much a practical necessity -- runs $1,500 to $3,000. Or zero if you use a normal 120-volt outlet, but you must be willing to wait a third of a day to half a day for a full recharge.

--Run on expensive batteries. To replace a battery pack outside of warranty could cost from $4,000 up. Battery warranties are long but not infinite -- 100,000 miles, plus or minus -- and will be a lot less reassuring to a potential second owner.

To replace a fuel system on a gasoline car would cost much less. To rebuild a gasoline four-cylinder engine, if that seems a fairer comparison, would cost roughly $2,000, though it could range much higher.

--Might require supplemental transportation. If a car's purely electric and has to be plugged in when the batteries are low, the real-world driving range is about 100 miles. That makes it a car for those who mainly drive short distances. Longer trips require a second car.

If you decide your second car will be an as-needed rental, freeing you from ownership costs, you could spend $50 to $100 a day or more to rent, depending on size, type and location. A plug-in hybrid can be an only car. When the batteries are low, it operates on gasoline power to run the car and help recharge batteries.

While cheaper than a pure electric, such as Nissan's Leaf, a plug-in hybrid still is more expensive than a conventional or non-plug-in hybrid gasoline car. And a plug-in's battery-only range is less -- 11 to 38 miles, depending on the car, according to the government -- which limits your savings from that $1.14 fuel cost. But the hybrid assist to the gas engine does stretch how far you can go on every $3.63 gallon of gasoline.

--Face uncertain depreciation. Based on actual sales prices, electrified vehicles will depreciate much faster than the most similar gasoline models, forecasts TrueCar.com and its ALG unit. But, if you assume the buyers get the federal tax credit, depreciation's similar.

For example, a 2013 Ford Focus electric is expected to be worth 51% of its transaction price after three years, while a similar gas model should be worth 65%. But factoring in the government tax credit makes the depreciation about the same.

--May bring higher electricity rates. The DOE says electricity prices are more stable over time than gasoline prices. But if demand grows fast, from electric cars or other uses for electricity, power rates will rise. The current system of power plants and electric grids is struggling to keep up already and improvements will require users to pay more.

Smokestacks near Emmett Kan. Electric vehicles run on power that may be created by coal.