Do Electric Vehicles Need Subsidies? A Comparison of Ownership Costs for C/H/EVs

Hanna Breetz (Arizona State University), Deborah Salon (Arizona State University)

Battery electric vehicles (BEVs) are an important pathway for decarbonizing and reducing petroleum dependence in the transport sector. Although one barrier to adoption is the higher purchase price, advocates suggest that savings in fuel and maintenance can make BEVs economical over time. This paper analyzes the relative costs of the most popular conventional, hybrid, and electric vehicles for 14 U.S. cities during a five-year period, 2011-2015. We found some spatial variation due to differences in subsidies, fuel prices, insurance and maintenance costs, depreciation rates, and vehicle miles traveled. Yet the BEV’s higher purchase price and rapid depreciation outweighed its fuel savings in nearly all cities. Under virtually all reasonable assumptions, federal and state incentives were critical for the electric vehicle to be cost competitive with the hybrid or conventional vehicles. Extensive sensitivity analyses highlight key parameters and assumptions.