Combustion Engine vs Electric Vehicle: An Economic Assessment

Introduction

The world has been steadily switching to more fuel-efficient vehicles that produce less emissions. Despite this, we have been very slow to make the change to zero-emission vehicles, such as battery-electric vehicles (BEVs). There are pros and cons to both BEVs and internal combustion engine vehicles (ICEVs). One should consider both the personal and external costs of different vehicle types.

BEV vs. ICEV: Personal Costs

Purchase Price

One of the largest personal costs of purchasing a BEV is the higher purchase price (Hagman et al., 2016; Palmer et al., 2018). Many countries offer subsidies for purchasing a BEV, which may help offset the larger purchase price, although the subsidy might be the reason for the higher purchase price (Hagman et al., 2016; Palmer et al., 2018; Carnex Canada, 2022). Despite subsidies, many people cannot afford to purchase a new BEV, and the market for used BEVs is currently very small. Depreciation rates have not proven to be much different for BEVs compared to ICEVs over three years, according to Hagman et al. (2016). However, other sources suggest EVs depreciate at a faster rate because of government subsidies (Carnex Canada, 2022), indicating that this will vary by country.

Maintenance

The largest advantage of a BEV is the much lower personal costs for maintenance and fuel (Hagman et al., 2016; Palmer et al., 2018). Electric vehicles (EVs) demonstrate lower maintenance requirements due to their mechanical components, fewer moving parts that experience wear, as well as regenerative braking capabilities, which reduce wear on brake parts (Hagman et al., 2016).

Mitropoulos et al. (2017) analyzed passenger vehicle maintenance costs, finding that internal combustion engine vehicles (ICEVs) incur an estimated maintenance cost of $0.0539 per mile. A study assumes that EV maintenance costs are approximately 30% less than those of ICEVs, resulting in an estimated cost of $0.0377 per mile for EV maintenance (Mitropoulos et al., 2017). This estimated cost suggests a significant personal cost advantage for EV owners compared to ICEV owners in terms of ongoing vehicle maintenance expenses. Table 1 summarises the total costs of ICEV, HEV, and EV vehicles.

Table 1: Personal Costs of ICEV, HEV, & EV in 2023 CAD

Note. Based on 10.6 years and 18,186 km annually (Mitropoulos et al., 2017) Data obtained from 2023, using the U.S. CPI to convert to 2023 from 2015 Consumer Price Index/ U.S. Historical CPI (U.S. Bureau of Labor Statistics, 2024) and the exchange rate to convert to Canadian dollars from the Bank of Canada (n.d.).

BEV vs. ICEV: External Costs

A study was also performed on the total externality costs of gas, hybrid, and electric battery vehicles, comparing all the prices of total externalities costs (Mitropoulos et al., 2017). The highest external costs were gas, followed by hybrid and electric vehicles, with the lowest externality costs of the three groups (Mitropoulos et al., 2017). However, note that this data is from the U.S., which has different methods of producing electricity. Electricity is also much cheaper than fossil fuels and taxed at a lower rate, meaning much cheaper fuel costs for a BEV (Palmer et al., 2018).

For external costs, one should consider things such as air pollution, climate change, noise, and congestion. External costs will vary greatly based on electricity generation methods. For example, a study done in Germany showed that there is no external cost advantage to EVs (Jochem et al., 2016). This finding is likely due to the methods of electricity production in Germany, resulting in greenhouse gas emissions when charging an electric vehicle. BEVs do not contribute directly to urban air pollution, which is a big positive for public health in urban areas (Palmer et al., 2018). Reduced emissions reduce potential climate change impact (König et al., 2021). EVs are often much quieter than ICEVs, which has a positive impact on urban noise pollution (König et al., 2021). Congestion at charging stations may be another reason for their low popularity (Palmer et al., 2018).

Table 2 summarises the total costs of ICEV, HEV, and EV vehicles.

Table 2: External Costs of ICEV, HEV, & EV in 2023 CAD

Note. Based on 10.6 years and 18,186 km annually (Mitropoulos et al., 2017) Data obtained from 2023, using the U.S. CPI to convert to 2023 from 2015 Consumer Price Index/ U.S. Historical CPI (U.S. Bureau of Labor Statistics, 2024) and the exchange rate to convert to Canadian dollars from the Bank of Canada (n.d.).

BEV vs. ICEV: Total Costs

Table 3 summarises the total costs of ICEV, HEV, and EV vehicles.

Table 3: Total Costs of ICEV, HEV, & EV in 2023 CAD

Note. Based on 10.6 years and 18,186 km annually (Mitropoulos et al., 2017) Data obtained from 2023, using the U.S. CPI to convert to 2023 from 2015 Consumer Price Index/ U.S. Historical CPI (U.S. Bureau of Labor Statistics, 2024) and the exchange rate to convert to Canadian dollars from the Bank of Canada (n.d.).

Conclusion

A vehicle purchase comes down to an individual’s needs and budget, and some scenarios and countries favour both types of vehicles. For an individual who does not do a lot of driving every year, an ICEV would likely be more cost-effective because the lower purchase price would offset higher fuel and maintenance costs. For an individual who does a lot of driving, a BEV would likely be more cost-effective because the amount of money saved in maintenance and fuel would offset the higher purchase price. EVs are effective at reducing greenhouse gas emissions if they are charged with renewable energy sources. However, with advancing technology, BEVs will likely become a lot more cost-effective for the average driver in the future.

Media Attribution

Figure 1: “Detroit Electric Automobiles (1917) (ADVERT 115)” by Anderson Electric Car Company (1917), via Wikimedia Commons, is in the public domain.

References

Anderson Electric Car Company. (1917). Detroit electric automobiles (1917) (advert 115) [Image]. Wikimedia Commons. https://commons.wikimedia.org/wiki/File:Detroit_Electric_Automobiles_(1917)_(ADVERT_115).jpeg.

Bank of Canada. (n.d.). Annual exchange rates (2019 to 2023). Retrieved April 10, 2024, from https://www.bankofcanada.ca/rates/exchange/annual-average-exchange-rates/.

Carnex Canada. (2022, September 27). Electric car depreciation: How well used EVs hold their resale value? https://blog.carnex.ca/used-evs-resale-value/.

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König, A., Nicoletti, L., Schröder, D., Wolff, S., Waclaw, A., & Lienkamp, M. (2021). An overview of parameter and cost for battery electric vehicles. World Electric Vehicle Journal. 12(1), 21. https://doi.org/10.3390/wevj12010021.

Mitropoulos, L. K., Prevedouros, P. D., & Kopelias, P. (2017). Total cost of ownership and externalities of conventional, hybrid and electric vehicle. Transportation Research Procedia, 24, 267–274. https://doi.org/10.1016/j.trpro.2017.05.117.

Palmer, K., Tate, J. E., Wadud, Z., & Nellthorp, J. (2018). Total cost of ownership and market share for hybrid and electric vehicles in the UK, US and Japan. Applied Energy, 209(108–119). https://doi.org/10.1016/j.apenergy.2017.10.089.

U.S Bureau of Labor Statistics. (2024, April 10). American consumer price index: 1913 to 2024 — Historical CPI for United States of America. Rate of Inflation. https://www.rateinflation.com/consumer-price-index/usa-historical-cpi/.